Annual Report 20 17 Annual Report 20 17 Annual Report 20 17 individual actions, individual talents, individual identities. we all, however, share the same desire to offer a life filled with light and an everyday reality filled with... energy

The Electricity Authority of Cyprus

The Electricity Authority of Cyprus is an independent, Public Corporate corporation established under the Electricity Development Law Cap.171 of 1952 in order to exercise and perform functions relating to the generation, transmission, distribution and supply of electric energy in Cyprus.

The above definition is used in Cyprus for corporations which are independent and which were established in accordance with the relevant Law, in order to render services in the utility field. Such corporations are governed by Authorities, the members of which are appointed by the Council of Ministers.

In case of the Electricity Authority of Cyprus, the government, through the Minister of Energy, Commerce, Industry and Tourism, is empowered to give directives to the Authority on matters appertaining to the general interest of the Republic.

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Our Mission is … Contents To provide our customers with the highest quality of safe and reliable services in the energy sector and in other activities at competitive prices, Board of Directors & Management 10 - 11 respecting society, the environment and our people and contributing to the development of our country. Chairman’s Message 12 - 13 General Manager’s Message 14 - 15 Public Governance 17 Operational Unbundling 19 Power Generation and Supply Business Unit 21 - 29 Networks Business Unit 31 - 39 Non-Regulated Services Management 41 Internal Audit Unit 43 Common Services General Management Office 45 - 50 Human Resources Management 51 - 56 Information Technology Management 57 - 59 Corporate Finance Unit 60 - 65 Auditor’s Report and Financial Statements 66 - 122 Appendices 123 - 125

7 Annual Report 20 17

The year in brief

% Increase 2017 2016 (Decrease)

GENERATION Total units generated million kWh 4 559,1 4 455,3 2,3 Maximum output capacity of power stations MW 1 478,0 1 478,0 - Maximum demand met MW 1 027,0 968,0 6,1 Thermal efficiency of generation % 37,0 36,3 1,9

SALES OF ELECTRICITY Sales million kWh 4 495,6 4 358,5 3,1 Consumption in the turkish occupied area million kWh 3,7 2,9 27,6 Average charge per kWh sold € cents 13,717 11,957 14,7 Consumers at 31 December thousand 568,5 565,6 0,5

FINANCIAL ACTIVITY Total income € thousand 676.482 580.288 16,6 Operating costs € thousand 614.182 491.183 25,0 Other losses net € thousand 78 5.415 (98,6) Operating profit € thousand 62.222 83.690 (25,7) Finance costs € thousand 2.661 6.585 (59,6) Tax € thousand 8.871 11.321 (21,6) Net profit for the year € thousand 50.690 65.784 (22,9) Remeasurement of Pension Plan Obligation € thousand 49.755 (108.337) (145,9) Capital expenditure € thousand 45.434 36.923 23,1 Average net assets employed € thousand 1.920.369 1.964.622 (2,3) Return on average net assets employed % 3,2 4,3 (25,6)

EMPLOYEES Employees in service at 31 December 2 023 2 035 (0,6) Sales per employee million kWh 2,22 2,14 3,7 Consumers per employee 281 278 1,1

9 Andreas Marangos Michalis Hadjipantela Agni Shialarou Elena Tsolakis Charalambos Artemis Chairman Vice Chairman Member Member Member

Board of Directors and Management Christina Zikkou Yiannis Constantinides Konstantinos Kosti Michael Komodromos Panayiotis Olympios Member Member Member Member General Manager

BOARD OF DIRECTORS MANAGEMENT

From 1.1.2017 until 31.12.2017 General Manager Distribution System Owner Manager Vacant Post Adonis Yiasemides Dipl Eng, MBA, MIET CHAIRMAN Deputy General Manager Andreas Marangos Adamos Kontos Distribution System Operator Manager Lawyer (from 1.1.2017) Anastasis Gregoriou BSc (Eng), Meng, PhD, MBA, MIEEE BSc (Eng), MBA, CEng, MIET VICE CHAIRMAN Executive Manager Networks Michalis Hadjipantela Petros Mina Adamos Kontos Certified Accountant (acting from 2.1.2017) BSc (Eng), MEng, PhD, MBA, MIEEE BSc Electrical Engineering, MBA, MIEE Anastasis Gregoriou MEMBERS Transmission System Owner Manager (acting from 2.1.2017) Costas Gavrielides BSc (Eng), MBA, CEng, MIET Agni Shialarou BSc (Eng), MEng, MBA, CIPR Diploma, MIET, MCIPR Lawyer Executive Manager Generation and Supply Alexis Michael Power Generation Manager Elena Tsolakis BSc (Eng), PhD, CEng, MIET George Skarparis Architect BSc (Eng), MBA, MBA (Oil Gas & Energy Management) Executive Manager Finance CEng, MIET, MIMechE Charalambos Artemis Vacant Post Lawyer (until 6.6.2017) Supply Manager Marios Skordellis Christina Zikkou Maria Charalambous BSc (Eng), MSc, MBA, CEng, MIET Lawyer (from 7.6.2017) BA Economics, MBA, FCA Yiannis Constantinides Certified Accountant LEGAL ADVISERS Konstantinos Kosti Ioannides Demetriou LLC Mechanical Engineer Lefkosia

Michael Komodromos AUDITORS Professor - Electrical Engineering Auditor General of the Republic PricewaterhouseCoopers Ltd, Lefkosia

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Chairman’s Message

EAC, through a course of over 65 years, plays a very important role both in the society and in the economy of our country. • Electrification in order to achieve its goal In the energy sector, which is one of the most vigorously growing sectors internationally, major changes have been o of low carbon emission by 2050. That is, to reduce electricity generation from conventional coal fuels to recorded. In Cyprus, we are at the threshold of a significant change, a major challenge caused by the expansion of the a minimum. electricity market on 1st July 2019. To achieve all the above, it is essential for the distribution network to continuously evolve into a “smart” network, in order With this in sight, EAC intensifies its preparations for which there are demands and expectations. Each Core Regulated to provide all the necessary infrastructure and services to all electricity market stakeholders. In simple terms, “intelligence” Activity organises its Units independently, to respond effectively to the new needs of the Market. The EAC is open to in networks means to integrate efficient telecommunication and computer systems in their operation. A basic component competition because it is an incentive to develop infrastructure, service quality, and offer innovative services to the is smart metering. In this way and in real time, all information leading in an effective and efficient management of energy consumer. In a nutshell, competition makes us better. needs as a whole, will be collected, processed and made available to the interested parties.

To enable conventional production to play a future role in supporting the introduction of Renewable Energy Sources and the Specifically, regarding smart metering, we are in contact with the relevant state authorities so that we can take the compliance of Generation Units with the strictest environmental limits, we have decided begin the use of Natural Gas (NG) necessary policy and implementation decisions in 2018. for electricity generation, before 2020. In this context, the Natural Gas Public Company (DEFA) will proceed with the help of consultants to be recruited, to prepare the specifications for the long-term supply and the adequate quantities of Liquefied EAC, as a Public Law Organisation belonging to all Cypriot citizens, takes every necessary step to act under its governing Natural Gas and to find a strategic investor for the construction and subsequent operation of the necessary infrastructure. Law, strictly following the good governance rules. Our goal is to upgrade our customer services and assistance. At the The EAC will hire consultants for its own contribution to these two processes and at the same time implements the same time, it is very important to be a financially active enterprise with the power to finance its development program and necessary steps for the conversion of the existing generation units to burn on NG. to modernise its infrastructure and facilities, while ensuring environmental protection.

EAC is ready to contribute to the NG infrastructure with percentage of participation in the submission of a proposal for The continuous and significant changes in the energy sector, force the EAC to constantly adapt to new realities and adopt the BOOT process, and with the corresponding percentage of ownership after the end of the process. In addition, EAC is technologies that enhance its infrastructure and further strengthen its high level of reliability. The benefits go beyond narrow taking action to install Photovoltaics, as part of the support project for electricity power generation from Renewable Energy business confines and belong to Cyprus itself. Sources. Recognising the importance of sustainable energy development, EAC monitors the cutting-edge technologies and actively The evolution of EAC’s electricity mix is expected to be determined upon completion of the study on the Generation participates in various European research and innovation programmes. Development Program. The study examines various system deployment scenarios, based on the parameters that affect it and is expected to establish EAC’s investment in generation capacity, both in conventional generation units as well as in The Board of Directors has a great responsibility to face up to the challenges and contribute substantially to the Renewable Energy units. development of EAC and reinsert itself in the new energy map of Cyprus. EAC’s high-level human resources, with their specialised know-how and innovation skills, are the Organisation’s greatest “working capital” on the road that lies ahead. EAC’s network, and especially the distribution network, is constantly evolving on the basis of new emerging market needs. I wish to express my gratitude to the President of the Republic of Cyprus, Mr. Nicos Anastasiades for the honour he has These mainly concern: bestowed upon me and for the trust he has shown me. I would also like to thank the Minister of Energy, Commerce, Industry & Tourism, Mr. Yiorgos Lakkotrypis for his personal cooperation and for that of all the officials of his Ministry. • Reliable integration of RES as scattered generation. The Government’s goal is that 16% of the electricity needs is generated from RES by 2020. I express my thanks to the Government, the House of Representatives, the Auditor General of the Republic, the Cyprus Energy Regulatory Authority, the Cyprus Transmission System Operator, to all those government bodies and local • Energy management with the active involvement of the consumer himself, transformed into a producer-consumer. government authorities with which EAC has collaborated, as well as the representatives of the Media for their promotion of The broader objective of the European Union is the gradual transformation of buildings of “virtually zero energy the work of EAC. consumption”. Finally, I particularly wish to thank all my colleagues on the Board of Directors, the General Manager of EAC, Mr. Panayiotis • The infiltration of electricity in transport. The goal of the European Union is that 10% of transport, which is now carried Olympios and the members of the Organisation’s Management, Union leaders and all the personnel for their productive and out entirely with the use of conventional fuels, will be based on electricity by 2020. creative cooperation.

• The installation of electricity storage systems to address the problem of unpredictable and discontinued power supply Andreas Marangos from RES. Chairman of the Board of Directors

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General Manager’s Message

The EAC, as a Vertically Integrated Public Law Corporation, operating in accordance with the Regulatory Decisions of • Management of the penetration of Photovoltaic Systems that will contribute to Sustainable Green Development and the CERA, has completed its mission for yet another year. The Generation, Transmission, Distribution and Supply of Electricity achievement of the national goal of 2020. has continued uninterruptedly throughout Cyprus. EAC has responded to the needs the Cypriots with path of responsibility and reliability, by providing power non-stop and it supported the massive effort of the people to revive the economy of • Development and detailed design for the implementation of the complete software SCADA/DMS (Distribution Cyprus, contributing effectively to the country’s upturn. Management System) for the integrated dynamic management of the Distribution Network by the EAC as the Distribution System Operator. This project is now in the tender process. The EAC personnel, using their technical know-how and exhibiting professionalism and dedication to the objectives set by the Organisation, have managed to stand next to the consumers and to provide them with efficient service. I therefore I should also point out that the activity of the Distribution System Operator on the GeoDiaS GIS Network Data Management congratulate our staff members and I ask them to continue working with the same zeal to reach our goals. This will enable System, has been published in the 2017 World Atlas for innovations by the American Global Mogul, ESRI. us all to face up to the great challenges ahead together. The system forms the infrastructure through which the thorough management of Network Planning, Energisation, Operation Amongst the aforesaid challenges, is the 3rd audit of the Accounting and Operational Unbundling by CERA, the opening of and Connections takes place. the Electricity Market in Jun 2019, the arrival of Natural Gas and the necessary readjustments of EAC’s Generation facilities, the anti-pollution works carried out at the Vasilikos Power Station, the installation of Unit 6 at the Vasilikos Power Station Looking forward into the future, the work of the Non-Regulated Services Management is of great significance, with the and the development and maintenance works in the sectors of Transmission and Distribution. The future course of our contribution of the Vasiliko Desalination Plant to lessen the water problem in our country. It should be noted that a study Organisation depends greatly on how we face these challenges. is being carried out to increase the production of potable desalinated water and the possible installation of a new water production plant for irrigation purposes. In 2017, the Non-Regulated Services Management, in the context of using RES, For the EAC’s advancement and modernisation purposes, a series of projects was implemented in 2017, the most important promoted the plans for the creation of more photovoltaic parks. In cooperation with the Ministry of Education, a preliminary of which are: study was prepared for the installation of photovoltaic systems in all schools in Cyprus. The final decision from the competent Minister is pending. • The installation of an anti-pollution system for the reduction of nitrogen oxide emissions from the Internal Combustion Units (ICU) 1 at Dhekelia Power Station. The inextricable relationship of the EAC with the Cypriot society calls for the firm and effective action and contribution of the Organisation within the framework of the Corporate Social Responsibility program. In 2017 the EAC supported, behind the • Commencement of works for the reconstruction of a desulphurisation unit at the Generation Unit No. 3 at Vasilikos scenes, a large number of associations and Organisations dealing in the relief of human suffering, as well as many others Power Station. who are active in the fields of Culture, Sports and the Environment.

• Commencement of works to convert Steam Units 1, 2 and 3 for the combustion of Natural Gas at Vasilikos The “Give Light to a Life” event has become an institution and is contributing to the financial support of the Cyprus Anti- Power Station. Cancer Society.

• The construction of the “Main Gate” Primary Substation in Akrotiri has been completed, as well as the upgrade of the A special chapter in EAC’s social report concerns our regular visits to the schools of Rizokarpaso. In December 2017, EAC’s Kolossi Substation, with the introduction of 22 kV voltage. delegation, headed by the Chairman of the Board of Directors Mr. Andreas Marangos, offered gifts and practical assistance to the schools and the School Trustees of Rizokarpaso. These visits have taken place for 14 consecutive years and are a • The installation of 75MVA power intakes has been completed at the “Alambra” and “Costas Petrou” Transmission pilgrimage in memory and hope for our occupied lands. Substations. On behalf of the EAC’s management and personnel, I would like to express my thanks to the Chairman of the Board of • Commencement of works for the construction of the Overhead Line of Transmission of “Vasilikos - Mari - Kofinou” and Directors Mr. Andreas Marangos, the Vice-Chairman Mr. Michalis Hadjipandela, as well as the remaining members of the for the Overhead Line/Underground Cable “Vasilikos - Moni, as well as for the construction of “Moni GIS” Transmission Board, for their tireless efforts to maintain the EAC a pioneer and on the cutting edge of developments. I would also like to Substation. These projects reinforce the core of the Transmission System. thank the Executive Manager Networks Dr Adamos Kontos for taking on the role of Acting General Manager for over a year.

• In the context of the work of the Distribution System Owner Unit, 158km of Medium Voltage and Low Voltage overhead During its long-term course and looking into the future, EAC has to constantly reaffirm its role as the leader in the Cypriot power lines, 226km of Medium Voltage and Low Voltage underground cables and 156 overhead transformers were energy scene. installed, while 53 ground Distribution Substations were established. Panayiotis Olympios • Operation and maintenance of the electric car charging system, known as e-charge, with the purpose to promote the General Manager use of electric vehicles in Cyprus. At the moment, the system includes 18 charging points nationwide.

14 15 Annual Report 20 17 public governance

The Electricity Authority of Cyprus was established and operates in accordance with the provisions of the Electricity Development Law, Cap. 171, which inter alia provides for the way in which it is governed. In addition to the above, the Board of Directors of the EAC, has adopted a Corporate Governance Code and a Code of Conduct, in the context of implementing CERA’s Regulatory Decision 04/2014 on Operational Unbundling, dated 3 March 2015. The Corporate Governance Code is a comprehensive text that consolidates and incorporates the principles of corporate governance, in accordance with the international best practices, such as those implemented by the administration and management of EAC. It includes, inter alia, the legal framework governing EAC’s operation, recording the manner of operation of the Board, of the Joint Special Sub-committees (JSS), the other committees of the Board, the role of the General Manager, Executive Directors and Directors of Core Regulated Activities. It also includes the Internal Rule of Operation of the Joint Special Sub-committees (JSS), in which the powers granted or not by the Board of Directors are recorded. The Code of Conduct provides a framework of principles and rules that govern the day-to-day operations of the EAC, the behaviour of its employees and their relationship with third parties. The Code applies to all EAC personnel including members of the Board of Directors and all Managers. In accordance with the principles of the Code of Public Governance: • The Board ensures that the Organisation’s purpose and the expected results for the citizens and users of the services provided is clear and makes sure that users receive high quality services. • The Board of Directors ensures that taxpayers and users receive services of corresponding value for the fee they pay. • The responsibilities of the Board of Directors are clearly specified and the responsibilities and duties of the Directors are clearly specified and the Board ensures that they are fulfilled. • Relations between Directors and the public must be clearly regulated. • The Board specifies the Organisation’s values, principles and standards and ensures that they are implemented. In addition, the Board sets strategic objectives, ensures sufficient financial resources and human resources and examines the performance of the management. • The behavior of each Director is an example to emulate effective governance and the Board takes decisions in a detailed, diligent and transparent manner. There is also a clear distinction between the administration and management of the Organisation. • The Board of Directors has access to high-level information, advice and support and ensures that an effective risk management system is in place. • Directors have the skills, know-how and experience they need to perform their duties adequately. • Persons involved in the governance possess skills and abilities that undergo regular honing and their performance is assessed both separately and as a whole. • Balance must be achieved between continuity and renewal in the composition of the Board of Directors. • Regarding accountability, the Board of Directors makes a distinction between official and unofficial relations and adopts an active and planned approach to dialogue with the public and its accountability towards the public. • The Board undertakes an active and planned approach to its responsibility towards the Organisation’s personnel and cooperates effectively with institutional bodies. In addition, the Board is responsible for the consequences of its actions and omissions, including civil or other liability of the Directors.

17 Annual Report 20 17 operational unbundling of EAC activities

Following the issuance of the Regulatory Decisions of the Cyprus Energy Regulatory Authority (CERA) with numbers 02/2014, 03/2014 and 04/2014 for the EAC Accounting and Operational Unbundling, EAC has continued to implement measures for its compliance in full cooperation with the CERA throughout 2017.

Through the compliance procedure, EAC has been restructured into four independent Core Regulated Activities (CRA) Generation, Supply, Transmission (Transmission System Owner), Distribution (Distribution System Owner and Distribution System Manager) and into Non-Regulated Activities, which between them operate independently.

According to the Regulatory Decision 04/2014, the other EAC Units operate as “Other Activities” by providing services to the CRAs.

The Corporate Governance and Operational Independence of the Core Regulated Activities are ensured:

• with the preparation of a Budget, Strategic, Business and Action Plan, by each CRA independently,

• with the implementation of the Corporate Governance Code and the Code of Conduct, as well as

• with the correct costing of man-hours of all services provided to and between Core Regulated Activities, Non-Regulated Activities and Common Services, in order to avoid cross-subsidization and distortion of competition.

Furthermore, an independent Management for the Distribution System Operator (DSO) has been created, within which the ring-fenced “Department of Meter Registration and Metering Records” operates to provide services to all Suppliers without discrimination.

By implementing the above measures, EAC seeks to achieve exclusion of cross-subsidization and protection of competition, to avoid “discrimination” and non-discriminatory behaviour towards consumers, users of the system and electricity market stakeholders.

As of 1st December 2016, a date which was set by CERA as the day of the implementation of Operational Unbundling to mark the beginning of the regulatory control period, EAC officially applies Operational Unbundling. The implementation of Operational Unbundling is a continuous and dynamic process in which improvements are based on recommendations by EAC Compliance Officers and the findings of internal and external auditors.

According to the RD 04/2014 EAC, has prepared a Schedule of Compliance for each Activity which is monitored by the Compliance Officers who have been appointed for this purpose. In 2017, compliance reports were prepared and submitted to the CERA.

19 Annual Report 20 17 generation and supply business unit

coefficient of efficiency for the Internal Combustion Plants GENERATION MANAGEMENT reached 41,36%.

During the year 2017, the Electricity Authority of Cyprus continued Moreover, the thermal coefficient of efficiency of the Steam Units, the implementation of its operations which provided for the full for units exported, reached 27,72% whereas the corresponding utilisation and maintenance of the existing Vasilikos, Dhekelia and thermal coefficient of efficiency for the Internal Combustion Plants Moni Power Stations. reached 40,11%.

VASILIKOS POWER STATION MONI POWER STATION

Vasilikos Power Station, with an installed capacity of 868 MW The installed capacity of Moni Power Station is 150 MW (4 x 37,5 (3 x 130 MW Steam Units, 2 x 220 MW CCGT Units and 38 MW MW Gas Turbine Units). It is noted that since 14/10/2013 all steam Gas Turbine Unit), generated in 2017, 2 858 288 MWh, which units have been withdrawn from the installed capacity of the corresponds to 62,69% of the total electricity generated from the Station and therefore the installed capacity of the thermal units Authority’s Power Stations. During the same period the Station has been reduced to 0 MW. exported 2 719 812 MWh which corresponds to 62,77% of the total electricity exported from the Authority’s Power Stations. Moni Power Station generated in 2017, 37 270 MWh which corresponds to 0,82% of the total electricity generated from the The thermal coefficient of efficiency for units generated, of the Authority’s Power Stations. During the same period, the Power Steam Units 1, 2 and 3, reached 38,06%, for the CCGT Unit No. 4 Station exported 36 327 MWh which corresponds to 0,84% of reached 46,74%, while for the CCGT Unit No. 5 reached 48,02%, the total electricity exported from the Authority’s Power Stations. while the Gas Turbine reached 23,61%. The thermal coefficient of efficiency of the gas turbines for units Moreover, the thermal coefficient of efficiency for units exported, generated reached 25,73% whereas the corresponding thermal of the Steam Units 1, 2 and 3, reached 35,44%, for the CCGT Unit coefficient of efficiency for units exported reached 25,08%. No. 4 reached 45,86%, while for the CCGT Unit No. 5 reached 46,34%, while for the Gas Turbine reached 23,61%. ENVIRONMENTAL ISSUES

DHEKELIA POWER STATION For the protection of the environment and the continuous monitoring of the air quality, four mobile air quality units, two Dhekelia Power Station, with an installed capacity of 460 MW (6 x at each operating Power Stations (Vasilikos and Dhekelia), 60 MW Steam Units and 100 MW for Internal Combustion Engines were in continuous operation at selected sites in the vicinity of (ICE1 & ICE2 Plants), generated in 2017, 1 663 539 MWh which the Power Stations during 2017. These fully equipped units are corresponds to 36,49% of the total electricity generated from the capable of monitoring the ground level concentrations of dust, Authority’s Power Stations. During the same period the Station nitrogen oxides (ΝΟx), sulphur dioxide (SO2), carbon dioxide (CO) exported 1 576 873 MWh which corresponds to 36,39% of the and ozone (O3). The units are also capable of measuring other total electricity exported from the Authority’s Power Stations. meteorological data such as wind speed and direction, air temperature and relative humidity. The thermal coefficient of efficiency of the Steam Units, for units generated, reached 29,38% whereas the corresponding thermal

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Due to the high NOx emissions of the Internal Combustion SYSTEM OPERATION Figure 1 Engines (ICE1) at Dhekelia Power Station, the Authority has Electricity supplied decided the installation of a Selective Catalytic Reaction (SCR) 2200 DeNOx system on these Engines with the aim to lower these In 2017 the total number of units generated by the EAC’s three 2100 emissions. This system was put in operation at the beginning Power Stations was 4 559 098 MWh, compared to 4 455 189 2000 1900 of 2017. MWh in 2016, representing an increase of about 2,33% over Estimated the previous year. 1800 STUDIES 1700 1600 Figure 2 (page 23) shows the total number of units generated 1500 Officers of the Operational Generation Unit were involved in the annually from 2008 to 2017, as well as the predicted generation 1400 procedures required for the Accession of Cyprus in the European for the period 2018 - 2027. 1300 Installed capacity Union and the effects these will have on EAC operations and 1200 especially in matters involving the environment and the generation Generation, Transmission and Distribution Losses 1100 of electricity. 1000 Electricity consumption at the Power Stations amounted to 900 800 The Operational Generation Unit prepared the verification report about 4,96% of the total generation, compared to 4,95% the Load (ΜWe) Peak with calculations of the carbon dioxide (CO2) emissions for previous year. 700 600 the period January-December 2016 based on the greenhouse Peak load gas Emissions Trading Directive. This report was subsequently 500 400 verified by an external consultant and submitted to the Ministry 300 Power Stations of Agriculture, Rural Development and Environment. 200 Substations 132/66/11kV 100 Substations 132/11kV 0 Substations 132kV

Substations 66/11kV 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Overhead Lines 132kV operated at 132/66kV YEAR

Overhead Lines 132kV Underground Cables 132kV Figure 2 Overhead Lines 132kV operated at 66kV Power Stations Underground Cables 132kV operated at 66kV Substations 132/66/11kV Overhead Lines 66kV TOTAL SYSTEM GENERATION (Μillion kWh) Substations 132/11kV Underground Cables 66kV Note: Since 2009, the figures below, SubstationsOverhead Lines132kV 220kV operated at 132kV include also R.E.S. Generation. 7 030 Substations 66/11kV 1 MONI P/S 6 870 Overhead Lines 132kV operated at 132/66kV 6 705

2 VASILIKOS P/S 6 515

3 Overhead DHEKELIA Lines P/S 132kV 6 330

Underground Cables 132kV 6 130 5 935 Overhead Lines 132kV operated at 66kV 5 725

Underground Cables 132kV operated at 66kV 5 495 5 266 Overhead Lines 66kV 5 230 5 156 5 030 4 996 Underground Cables 66kV 4 977 4 863

Overhead Lines 220kV operated at 132kV 4 719 4 512

1 MONI P/S 4 315 4 253 2 VASILIKOS P/S

3 DHEKELIA P/S LEFKONICO

OMORFITA MIA MILIA NIKITAS PAPAKOSTAS IERATIKI DISTRICT OFFICE SHOLI PRENTZAS KOKKINOTRIMITHIA DASOUPOLIS ATHALASSA OROUNTA STROVOLOS AMMOCHOSTOS

ERGATES LAKATAMIA ATHIENOY AYIOS POLIS COSTAS LATSIA NICOLAOS MELINOZA TEMBRIA PETROU DHEKELIA “GIS” PROTARAS DHEKELIA ALAMBRA SOTIRA AYIA NAPA PSEVDAS KARVOUNAS DHEKELIA P/S LARNACA LARNACA COMMERCIAL CETRE F.I.Z AKOURSOS ROAD STROUMBI TRIMIKLINI NEW ALEXIGROS INTERNATIONAL AIRPORTLEFKONICO KOFINOU AY. ATHANASIOS OMORFITA MIA MILIA PAFOS NEW YERMASOGIA ΜΟΝI ANATOLIKO NIKITAS AMATHOUS HADJIPASCHALIS AY. PHYLA PAPAKOSTAS OREITES IERATIKI MARI DISTRICT OFFICE YPSONAS SHOLI PRENTZAS KOKKINOTRIMITHIA VASILIKO CEMENTDASOUPOLIS WORKS AFRODITE PISSOURI POLEMIDIA SOUTH VASILIKOSATHALASSA XEROPOTAMOS CENTRAL VASILIKOS EPISKOPI OROUNTA MONI P/S AMMOCHOSTOS STROVOLOS ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 ‘26 ‘27 ΟΜΟΝΟΙΑ VASILIKOS P/S KOLOSSI ERGATES LAKATAMIA AYIOS OLD ATHIENOY POLIS COSTAS LATSIA NICOLAOS MELINOZA TEMBRIA POWER STATION PETROU DHEKELIA “GIS” PROTARAS ACTUAL ESTIMATED DHEKELIA ALAMBRA SOTIRA AYIA NAPA PSEVDAS KARVOUNAS DHEKELIA P/S LARNACA LARNACA COMMERCIAL CETRE F.I.Z 22 AKOURSOS STROUMBI 23 ROAD TRIMIKLINI NEW ALEXIGROS INTERNATIONAL AIRPORT KOFINOU AY. ATHANASIOS PAFOS NEW YERMASOGIA ΜΟΝI ANATOLIKO AMATHOUS HADJIPASCHALIS AY. PHYLA OREITES MARI YPSONAS VASILIKO CEMENT WORKS AFRODITE PISSOURI POLEMIDIA SOUTH VASILIKOS XEROPOTAMOS CENTRAL VASILIKOS EPISKOPI MONI P/S

KOLOSSI ΟΜΟΝΟΙΑ VASILIKOS P/S OLD POWER STATION Annual Report 20 17

Fuel Consumption DEVELOPMENT PLAN OF EAC The unbilled electricity consumption of Turkish Cypriots in the SUPPLY areas of the Republic of Cyprus where the Government of the The amount of heavy fuel oil consumed by the Power Stations The EAC has taken the decision to install an SCR DeNOx System Republic does not exercise effective control is 3,7 GWh. totalled 777 929 Metric Tonnes, compared to 882 677 Metric on No. 1 Internal Combustion Engines (ICE1) at Dhekelia Power CONSUMERS Tonnes the previous year, representing a decrease of 11,87%. Station, the commercial operation of which was at the beginning Table 2 below shows the allocation of billed sales of electricity by of 2017. At the end of 2017, the total number of consumers in the consumer category, as well as the percentage increase over the The total quantity of diesel fuel consumed by the Power Stations government-controlled areas of Cyprus stood at 568 500, previous year. was 255 220 Metric Tonnes, compared to 149 967 Metric Tonnes The Authority has investigated and evaluated its options for the a net increase of 2 944 or 0,5%. consumed during 2016, representing an increase of 70,18%. installation of reduction emission technologies on all Units at Sales for the years 2015, 2016 and 2017 are shown in Figure 4. Vasilikos Power Station. In addition, EAC will proceed with the Table 1 below shows the number of consumers by category as Sales and revenue for 2017 are shown by consumer category and The average calorific value of the fuel oil used was 42 889 kJ/kg construction of the required Natural Gas infrastructure at well as the percentage increase/decrease over the previous year. as a percentage of the EAC’s total sales and revenue in Figure 5. compared to 42 844 kJ/kg in 2016. Vasilikos Power Station. BILLED SALES OF ELECTRICITY Plant Efficiency The Authority has also issued a Tender for its Development Plant, with an aim, amongst others, to evaluate the necessity Billed sales of electricity in the government-controlled areas The average generating system efficiency in 2017, based on the of installing a new Generating Unit. amounted to 4 495,6 GWh, compared to 4 358,5 GWh the total units generated by the EAC’s three Power Stations, was previous year, representing an increase of 3,1%. 37,04% compared to 36,25% in 2016. The heat rate per kWh generated was 10 226 kJ/kWh compared to 10 448 kJ/kWh in 2016.

Figure 3 Table 1

NUMBER OF CONSUMERS RECORDED MAXIMUM AND MINIMUM TOTAL GENERATION FOR SUMMER AND WINTER PERIOD OF 2016 As at As at Consumer category 31.12.2017 31.12.2016 Change %

1150 Domestic 444 895 442 293 0,6 1100 Commercial 87 065 86 494 0,7 1050 1011MW Industrial 9 760 9 596 1,7 1000 Agricultural 15 902 15 886 0,1 950 Recorded maximum daily Public Lighting 10 878 11 287 (3,6) 900 total generation for summer 844ΜW TOTAL 568 500 565 556 0,5 850 period 2017 (Monday, 03/07/2017) 800 750 Maximum daily total 700 ΜW generation for winter Table 2 650 period 2017 (Tuesday, 31/1/2017) 600 BILLED SALES OF ELECTRICITY (MWh) 550 As at As at 500 Consumer category 31.12.2017 31.12.2016 Change % 450 Domestic 1 641 033 1 567 312 4,7 400 Commercial 1 755 094 1 728 200 1,6 350 Industrial 856 422 819 693 4,5 300 Minimum daily total generation for 2017 Agricultural 156 453 155 638 0,5 250 278MW (Monday, 17/04/2017) Public Lighting 86 578 87 648 (1,2) 200 TOTAL 4 495 580 4 358 491 3,1 7:00 7:30 0:00 0:30 1:00 1:30 2:00 2:30 3:00 3:30 4:00 4:30 5:00 5:30 6:00 6:30 8:00 8:30 9:00 9:30 17:00 17:30 10:00 10:30 11:00 11:30 12:00 12:30 13:00 13:30 14:00 14:30 15:00 15:30 16:00 16:30 18:00 18:30 19:00 19:30 21:00 21:30 20:00 20:30 22:00 22:30 23:00 23:30 TIME

24 25 Annual Report 20 17

Figure 4 STORAGE OF THERMAL ENERGY TARIFF Following the adoption of new tariffs, the Maximum Demand charge for Large and Very Large Commercial/Industrial SALES OF ELECTRICITY Storage of thermal energy sales (tariff Code 56) totalled Customers has been abolished. For these customer categories, (millions kWh) 58 445 MWh, representing an increase of 14 345 MWh or the new STOD tariff includes only the electricity price level 32,3% compared to 2016. This was due mainly to the most applicable at the particular time of day and season. 243 adverse weather conditions that prevailed. The average charge for the Tariff Code 56, increased from 6,38 cents in 2016 to CUSTOMER SERVICE AND BILLING SYSTEM 856 2017 8,24 cents in 2017. 1 641 Since the implementation of this new system, the standard of 1 755 Consumers opting for the thermal energy storage tariff totalled EAC customer service and information has improved significantly. Total: 4 495 20 657, representing a reduction of 232. Of these, 20 360 (98,6%) Moreover, the system facilitates and speeds up the day-to- were domestic consumers with an average consumption of day work of the EAC’s Customer Service departments to a 243 2 812 kWh compared to 2 092 kWh in 2016. considerable degree. The entire system is the main tool and 820 source of information for the EAC Contact Centre. 2016 1 567 TARIFFS 1 728 The technical upgrading of the system has been completed Total: 4 358 In the context of the upgrading of the EAC’s services and its in 2017. efforts aimed at energy conservation, we once again sent out 215 an annual statistical report to all our monthly billed customers. CONTACT CENTRE Others 686 This report includes information on monthly consumption and Industrial 2015 peak demand for their premises, as well as monthly voltage and The Contact Centre enables the EAC to provide good quality 1 476 Domestic load indicators, which are directly linked to proper energy use service and information to consumers/customers quickly and 1 659 Commercial and conservation. efficiently, to promote a progressive and dynamic image and, in Total: 4 036 general, to respond to the expectations of consumers/customers. In the framework of the special domestic tariff (Code 08) for large and needy families, by the end of December 2017 some 20 823 Billing Service customers were benefiting from this. The total benefit to customers in 2017 and consequently, the reduction in revenue The Billing Service enables customers to call the islandwide Figure 5 to the EAC as a result of this special tariff, was €3.856.991 four- digit number 1800 (early in 2018 the number will change to compared to what it would have been if these customers had 1818) and be automatically informed of the amount of their bill ELECTRICITY SALES & REVENUE BY CONSUMER CLASS remained on tariff Code 01. by keying in their bill number. They may also receive information and clarifications about bills, methods of settlement, connections, The average selling price of electricity per kWh in all categories reconnections, disconnections, transfers, domestic tariffs, how increased from 11,957 cents in 2016 to 13,717 cents in 2017 or to become a first-time customer, etc. In 2017, the Billing Service 14,7 %, as a result of the increase of oil prices. received approximately 155 000 calls.

Street Lighting Agriculture Industrial During the year 2017, within the framework of the liberalised Apart from the Billing Service the Supply Management, through electricity market in Cyprus, the EAC Tariffs Team in the Contact Centre, provides by Service Level Agreement to the collaboration with external consultants started drafting new Distribution System Operator Unit the following other services: marginal cost tariffs. Meter Reading Service 1,85% 3,43% 16,60% The whole effort was focused on simplifying and reducing the 2,01% 3,48% 19,05% number of tariffs as well as the elimination of cross subsidies that One of the services provided by the Contact Centre is that of exist between various types of tariffs. Meter Reading service. This service enables customers whose meters have not been read because, for example, their premises After discussions with the Cyprus Energy Regulatory Authority were closed, to call the freephone number 80006000 at any (CERA), EAC submitted a new revised study on tariffs to CERA in time, and key in the 10-digit meter indication. In 2017, the Meter

Revenue €616.641.000 June 2017, which was approved by Regulatory Decision 97/2017. Reading Service received approximately 25 000 calls.

Sales 4.495.580 MWh The new tariffs came into force on 1/9/2017 for monthly Commercial Domestic customers and on 1/11/2017 for bi-monthly customers.

40,15% 37,97% 39,04% 36,50%

26 27 Annual Report 20 17

Faults Reporting and Complaints Service who settle their account via bank order and also receive their EAC Mobile Application process and its compliance with the directives, legislation and electricity bill electronically participate in a draw for 10 coupons regulations of the European Union, the Government proceeded The Contact Centre’s Faults Reporting and Complaints Service every three months. The Supply Management launched a tender for the design and with, among other things, the necessary legislative, regulatory has replaced and improved the services previously provided by operation of the EAC mobile application for iOS and Android, for and administrative measures for the promotion of the use of the Islandwide Faults Reporting Centre (IFRC). e-bill CAMPAIGN mobile and tablets. Through the use of this application the EAC Renewable Energy Sources (RES) and, more generally, of energy customers will be able to get information about various aspects conservation with the ultimate goal of increasing the contribution The aim of this service is to provide customers with a full, At the end of the “Join and Win” campaign, the Supply Unit of the EAC that interest them. The project will be completed in of RES to the country’s energy balance. top quality telephone response during major faults causing organised a new e-bill campaign under the banner “Go with early 2018. lengthy power cuts as well as during daily, isolated faults on the Flow!”. In accordance with existing legislation and the relevant decisions the EAC network, on customer premises and to street lighting. New Electricity Bill of the Council of Ministers, the EAC is obliged to purchase Furthermore, customer complaints are recorded on issues In a fast and simple way, by registering with the EAC website electricity generated by Producers using Renewable Energy concerning the EAC network such as tree pruning, street lighting www.eac.com.cy, customers can request to receive their bill by In accordance with the provisions of the relevant Regulatory Sources who are registered with the Grants/Subsidies scheme problems, etc. e-mail (e-Bill). In this way, they can organise their expenses in a Decision, based on the corresponding provisions of the EU of the Ministry of Energy, Commerce, Industry & Tourism and to better, more direct way and, through EAC’s savings on paper, acquis communautaire, which operationally separate the four distribute it on its grid at an avoidance cost price determined by Customer calls are routed via the islandwide four-digit number contribute to protecting the environment. Core Regulated Activities, EAC proceeded with the revision of its the Cyprus Energy Regulatory Authority (CERA). To this end, an 1800 to Customer Service Officers at the Contact Centre where electricity tariffs. Electricity Purchase Agreement is signed between the Producer the faults are recorded automatically and subsequently reported At the same time, for two years from November 2017, the money using RES and the EAC. In addition to the purchase price paid to Area technical crews for repairs. In 2017, the Faults Reporting saved by EAC for not having to print and post electricity bills for On the basis of EAC’s operational unbundling, the allocation to the Producer by the EAC, the Producer receives a subsidy for and Complaints Service received approximately 160 000 calls. customers opting for the e-Bill service will be donated to one of its of costs and the related charges for each activity must be the generated kilowatt hours of electricity from the Special Fund chosen charities. clearly shown. for Grants/Subsidies, having been approved/registered with the New Applications Service Special Fund for Grants/Subsidies. Send SMS to customers With the new tariffs, charges for Energy, Network, Ancillary Customers can dial the islandwide four-digit number 1800 to Services, Supply and Metering are shown separately so that By the end of 2017, a total of 1 937 photovoltaic systems had be informed either automatically or by a Contact Centre officer During 2017, the Supply Management continued its effort to help customers can see and understand how their bills are calculated. been installed (compared to 1 918 photovoltaic systems at the about the documentation required to accompany an application even further its customers who for any reason have delayed the end of 2016, i.e. an increase of 1,0%) and were producing up to for electricity supply and about what stage their application has payment of their electricity bill, adopted, as an additional reminder Renewable Energy Sources 75 040 kW, with a total installed voltage (compared to 53 778 kW reached. In 2017, the service received approximately 18 200 calls. the sending of SMS messages to customers for settling their bills, at the end of 2016, i.e. an increase of 39,5%) and total production before EAC proceeds with disconnecting the electricity supply to EAC is acting always under the strict framework of Cyprus’ of 111 360 646 kWh (94 406 021 kWh at the end of 2016, i.e. an “Join And Win” Campaign their premises. appropriately adapted and amended Laws and Regulations increase of 18,0%). It should also be noted that by the end of concerning the subject of Renewable Energy Sources (RES), 2017, some 14 Generation Units using biomass/biogas were in During the year 2017, the Supply Management continued and Wireless Network Wifi in Customer Service Centres and continued in 2016 to give all possible technical assistance operation with a total installed capacity of 9 714 kW and a total ended the campaign “Join and Win” giving the opportunity to and priority in the examination of customer’s applications to production of 36 496 169 kWh. The six Wind Parks operating on customers to win supermarket vouchers worth €100. Specifically, Since February 2017, the Supply Management is providing install units for generating electricity from RES. the island with a total installed capacity of 157,5 MW, generated customers who settle their account via bank order participate wireless wifi network in eight of EAC’s Customer Service Centres In accordance with the provisions of European Directive 2009/28/ 211 018 894 kWh in 2017. in a draw for 10 vouchers every six months while customers throughout Cyprus, thus providing free online access ΕC (previously 2001/77/ΕC), issued during Cyprus’ accession to customers.

28 29 Annual Report 20 17 networks business unit

INTRODUCTION The EAC’s Area Offices are the following: • Nicosia-Kyrenia-Morphou In accordance with recent amendments to Cypriot legislation, • Limassol the Networks Business Unit is the Owner and Operator of the Distribution Network and the Owner of the Transmission Network. • Famagusta-Larnaca A particular characteristic of the Unit is that it deals with what is, • Paphos by its very nature, the dominant part of the work of EAC and this creates a need for monitored Regulation, so that the objectives The Area Offices are organised into Departments which fall under laid down by the EU and the Republic of Cyprus concerning the the jurisdiction of the three Units of the Networks Business Unit functioning of the electricity market are achieved. as follows: The Networks Business Unit has long aimed at finding the best • Studies/Planning/Connection Terms and Conditions (DSO) technological solutions, leading to the most reliable supply of • User Assistance/Inspection of Installations (DSO) electricity at the lowest possible cost. Especially nowadays, with the arrival of distributed generation and the development • Construction and Distribution Network Maintenance (DAO) of two-way communication between consumers and network • Construction and Transmission Network Maintenance (TAO) monitoring points through a modern, reliable telecommunications infrastructure, the need arises and the right circumstances are created for the networks’ transformation into a smart network, with all the accompanying benefits.

Organisationally, the Networks Business Unit consists of the following Units and the respective Departments of the DISTRIBUTION SYSTEM Area Offices OPERATOR (DSO) UNIT • Distribution System Operation (DSO) Unit The particular responsibilities, rights and obligations concerning • Distribution System Owner (DAO) Unit the Distribution System Operator (DSO) arising from Cyprus’ • Transmission System Owner (TAO) Unit legislation create special requirements for their optimal, strict and effective implementation for the benefit of consumers and All the activities of the Area Offices, apart from Supplies, take the economy. place under the jurisdiction of the Networks Business Unit, with the objective of providing a complete range of network-related The work of the Distribution System Operator is the development services. The aim of the Area Offices is the provision of the best and efficient operation of the Electricity Distribution Network in possible customer service with the ultimate goal of offering an Cyprus, according to the new standards, as well as the assurance uninterrupted, reliable supply of electricity and connecting of transparent, impartial access to the network by the consumers new consumers. and, in general, all network users. It aims at ensuring a reliable power supply for consumers, the quality of the voltage and For better quality customer service, the Area Offices have making constant improvements to the quality of service, as well obtained the ISO 9001 Quality Certification and have a as the smooth operation of the electricity market, since almost all commitment to CERA to maintain a Customer Charter with Producers, Suppliers, Consumers and Prosumers are users of the specific guaranteed services. Distribution Network.

31 Annual Report 20 17

On the basis of the provisions of the law presently in force, the In the framework of its role as Distribution System Operator, the • H2020, LCE04, FLEXITRANSTORE (An integrated Platform Data Management System (GeoDiaS) and the special outage work carried out by the DSO concerns: Networks Business Unit, among others: for Increased FLEXIbility in smart TRANSmission grids with management system (OMS) which will be integrated in the STORage Entities and large penetration of Renewable SCADA/DMS system, are the valuable tools for the minimization • Managed the penetration of the following Photovoltaic 1. Responding to applications from users Energy Sources) of power cuts for consumers and other users of the network and Systems: http://www.flexitranstore.eu/ will help to improve the quality of services provided. • New connections for consumers and producers.

• Increased capacity of existing connections. • H2020, LCE02, inteGRIDy (integrated Smart GRID Coss- Distribution Network Development Studies Total Functional Solutions for Optimized Synergetic Energy • Network transfers. Photovoltaic Systems Number of Installed Producers Capacity (kW) Distribution, Utilization and Storage Technologies) The Distribution Network Development Studies are carried out • Expansion of the Street Lighting Network. http://www.integridy.eu/ and monitored by the relevant departments of the Area Offices. Net Metering 10 360 33 213 The Studies and Planning Department of each Area Office deals 2. Network Development • Interreg Mediterranean, Priority Axis 2 - Environment, StoRES with Studies/Planning and the publication of Connection Terms Autoproducers 94 4 277 and Conditions. The main work in the area of Studies is the • Network reinforcement, improvement and modernisation. (Promotion of higher penetration of distributed PV through storage for all management of applications from consumers or producers for Other systems through the purchase 1 936 75 041 • Construction of Distribution Centres and the necessary of electricity https://stores.interreg-med.eu/ connection to the EAC Network and all the study related tasks, interconnecting network. obtaining government approval and consent. The Connection • Expansion of the e-charge network for electric vehicles. • Interreg Balkan-Mediterranean, Priority Axis - Environment, Terms and Conditions Department deals exclusively with the PV-ESTIA, Enhancing storage integration in buildings with publication of Connection Terms and Conditions for Applicants. • Undertook the management of the GREEN+ proposal, which Photovoltaics) In order to expand and develop the Distribution System, 4,582 3. Distribution Network Operation and Use was submitted by the Republic of Cyprus and approved by https://www.pv-estia.eu/ studies were completed by the Area Office Study Departments in the European Commission in the context of the NER 300 • Distribution Network operation. 2017 compared with 4,482 in 2016, an increase of approximately project. It is an ambitious proposal which, if implemented as • SOLAR-ERA.NET Transnational Calls, PV4.3, INFORPV 22.3%. • Network user service. a project, will be a pioneering application of smart networks (Innovative Forecasting PV Energy Yield Solution for and distributed generation in environmentally sensitive areas, • Provision of ancillary services. Sustainable Large Scale Deployment) User Assistance/Inspection of Installations mainly in the Troodos region. • Consumption metering http://www.pvtechnology.ucy.ac.cy/pvtechnology/projects/ inforpv/ The main work of the Department includes the following: • Operated and managed the e-charge electric vehicle charging • Support to the Cyprus TSO for the operation of the System, • Providing assistance to Network Users regarding electrical/ system with the aim of supporting the use of electric cars providing all the necessary elements for the operation of System Control and Data Acquisition / Distribution technical issues. in Cyprus. At present, the system has 18 charging points. the country’s interconnected electricity system. Management System (SCADA/DMS) Also, an entire system for checking and monitoring electric • Providing assistance to Network Users regarding Quality of • Metering Assurance and Intervention Management to vehicle charging points was installed and brought In 2017, in conjunction with its Consultants, the EAC continued Supply. EAC’s equipment. into operation. Proposals have been submitted to various with the preparation of the Technical Specification of the stakeholders for expanding the charging infrastructure with implementation of an integrated SCADA Distribution Management • Carrying out on-site inspections for connections to the current 4. The smooth and efficient operation of the Electricity additional points within the region of the Municipality of System (DMS). Furthermore, in 2017 progress was made in other Low Voltage Network. Market at Distribution level. Nicosia and fast charging points on highways. In 2017, a important matters such as the market of remotely controlled • The management of information on the interconnected decision was taken to expand the e-charge service with twelve equipment for Medium Voltage Substations and the promotion of • Revenue Protection/Monitoring meter accuracy/Investigating Distribution Network with the implementation of a smart (12) additional semi-fast charging points and six (6) fast central monitoring of the quality of power. The project includes meter faults. network and smart meter architecture for the benefit of all charging points throughout Cyprus. The number of e-charge the essential hardware and software as well as the establishment stakeholders in the electricity market. customers, as well as electricity sales, rose sharply during the of the National Distribution Monitoring Centre (NDMC) and the • Tampering/Theft/Recording Damage to meters. year in review. • Supporting distributed generation through net metering, Emergency Distribution Monitoring Centre (Emergency DMC). demand forecasting, etc. Progress has also been made in the construction works in the • Inspection/Re-checking of electrical installations of consumers • Participated in various research projects, aiming in technology Central Offices where the NDMC will be established. and producers. • Serving consumers through demand management and technical solution development to help the electrical

systems for the optimum use of the distribution network to effectively and better integrate RES, both from a Through the aforementioned Monitoring Centres and the • Ensuring compliance with the current legislation regarding infrastructure so as to satisfy the needs of consumers in technical as well as from an economical point of view. These management applications for the SCADA/DMS system, a the inspection, connection and availability of electricity from the most economical way. are projects showcasing the aforesaid technologies and complete management of the Distribution Network will be Renewable Energy Sources. solutions to help raise the level of technological readiness • Providing the necessary ancillary services for the efficient achieved, as well as an effective management of the increasing • Ensuring compliance with the terms and conditions governing and make them widely implementable in the everchanging operation of all active elements connected to the penetration of electricity generation from RES, which will also access to and use of the Distribution Network and with the environment. Distribution Network. contribute to the maximization of the network’s capacity to Distribution Network market rules. absorb this kind of generation. This is why this project is of the • Η2020, LCE02, GOFLEX (Generalized Operational FLEXibility outmost importance for the EAC and Cyprus in general. • Informing the Operations Department of problems on the for Integrating Renewables in the Distribution Grid) Connecting the SCADA/DMS system with the GIS Network Distribution Network. https://www.goflex-project.eu/

32 33 Annual Report 20 17

This work is mainly carried out by the User Assistance/Inspection GIS Network Data Management System (GeoDiaS) the preparation of Codes of Practice and Construction Methods of Installations departments of the Area Offices. DISTRIBUTION SYSTEM as well as Distribution Network Technical Manuals and Processes. The GeoDiaS GIS Network Data Management System operates During the year in review, the User Assistance Department with the Geographical Information System (GIS) system at its OWNER (DAO) UNIT These technical specifications are under constant revision due to proceeded with the implementation of the IS0 17020 standard core and constitutes the infrastructure within which the dynamic changes to International Standards, improvements in technology with the objective of being accredited in the following fields: management of the Planning, Energising, Operation and The Distribution System Owner (DAO) Unit deals with the or changes in the use of materials. There are, in total, 235 Connections of the electricity network takes place. entire range of work relating to the expansion, reinforcement approved technical specifications concerning 1,295 materials, 55 • On-site inspection of installations and maintenance of the Distribution Network and the technical instructions and 39 Distribution Network procedures. In The GIS is responsible for the dynamic management of the whole Telecommunications Network with the aim of responding to the 2017, 31 technical specifications, 7 technical instructions and all • Inspection of photovoltaic systems of the electricity and electronic communications systems and is present-day needs of the Electricity Authority and, more generally, Distribution Network procedures were revised. updated constantly through the constant and systematic work the needs and demands of the country’s economy and society. • On-site inspection of meters of the technical departments across the whole network, thereby At the same time, the DAO Unit provides technical support on securing its dynamism and electrical function. The full operation Construction issues of cooperation with strategic partners and of connections • Network quality measurement of the GIS systems supports daily data updates and for producers using RES and other distributed generation to the the management of the electricity system. Distribution Network development projects are implemented and Distribution Network. Ring-fenced Measurement Recording Department monitored by the responsible departments of the Area Offices. Work is carried out in the framework of the strict operating The cost of construction work for the expansion and development Supply Chain Management The main tasks of the Department are the following: processes of the GeoDiaS system, including the certification of the Distribution System in 2017 amounted to some €20,291,608 and monitoring of the quality of the Network data updates, and corresponding to 3,784 construction files/studies. In order to satisfy the need for expansion, upgrading and • Meter reading and recording the strict workflow management system. maintenance of the Distribution Network, the DAO Unit maintains Specifically, in 2017, 158 kilometres of Medium Voltage and Low stocks of materials and equipment. • Recording of interventions to EAC equipment With the whole Medium and Low Voltage Distribution System Voltage overhead power lines were installed, together with 226 being recorded, attention is now focused on network data quality kilometres of Medium Voltage and Low Voltage underground The single Distribution Supply Chain consists of the Distribution • Gathering metering data assurance, both for current and for new recordings. Updating the cables. Some 156 overhead transformers were installed and 53 Network Materials Management Team, the Central Distribution system includes 30% of connected network users and completion distribution substations were established. Storage and the Area Storage. • Data processing and monitoring of all connections is being concluded at a rapid pace. At the same time, the active generation capacity from RES is maintained with Maintenance The operation of the Central Distribution Storage and the • Sending data to suppliers the technical characteristics of each system. In mid of specific centralised system of replacement of stocks by the DAO Unit applications, the GIS also governs the applications received by In the framework of implementing a Project Management has contributed substantially to a reduction of the accumulated • Supplier change process EAC, the views towards Government Authorities and the process environment across the entire network workload, all distribution Distribution Network material stocks held by the EAC. Stocks are of establishing new Distribution Sub-stations. network maintenance work was planned, monitored and now regulated dynamically according to the needs of technical/ During the year in review, a tender was awarded and a new managed as a single major annual project of the Distribution financial studies as well as for Distribution Network material software was implemented on a new meter reading system, as During the year in review, the needs and specifications for the System Owner (DAO) Unit. requirements of the past 12 months. well as new meter readers. It is estimated that in the following implementation of the “Designer” system were established year, this system will be fully used in other meter related areas. with the supplying company “Schneider Electric” regarding For the maintenance of the Low Voltage (LV) Network in 2017, As of 31/12/2017, the total value of Distribution Network Material The specific department is operationally ring-fenced and its the completion of the Electricity Distribution Network patrols and tree pruning took place along an LV line length of stocks (Central Storage, Area Storage and MRTC) amounted to personnel are located in specific parts of the Area Offices. expansion studies. 4,250 km. For the maintenance of the Medium Voltage (MV) €20,049,574. Network, a total of 5,685 km of MV lines were patrolled, pruning Meter Data Management System (MDMS) As regards the Transmission System, all transmission substation took place and vegetation was cleared along a total of 5,851 km Evaluation of Tenders and Contract Management premises and monitoring buildings, the route and circuits of the of MV power lines. Additionally, 958 equipment earthing systems In 2017, in conjunction with its Consultants, EAC has proceeded overhead power lines and underground cables, together with were inspected and 177 were repaired while simple equipment During 2017, the Network Purchase Department (NPD) issued 59 with the detailed design and issue of a Tender for the their connections, have been registered. Improvements to various maintenance was carried out in a further 199 cases. Category A Procurements. During the same time, the DAO Unit implementation of a complete Meter Data Management System. parts of the Transmission System, such as the overhead and personnel participated in the evaluations of 7 large scale tenders underground networks and the substations, are continuing at As regards Transmission Substation maintenance, annual work (Category B- Community), 3 large scale tenders (Category B – This project shall include all the necessary infrastructure on the a rapid pace. was carried out on 2,695 substations, twice-yearly maintenance Non-Community) and 43 small scale tenders (Category A), while inspection, management and storage of the total of readings took place in 1,042 substations and ten-year maintenance was managing 63 material supply contracts, 11 service provision collected from meters of electricity consumption and generation, In 2017, the GIS obtained the third international award and it carried out on 107 Transmission Substations. contracts and 5 contracts related to both small scale (Category A) in accordance with the requirements of the Electricity Market was featured in the 32nd edition of the annual series of Map and large scale (Category B) projects. Regulations. Books issued by Esri (http://www.esri.com/esri-map-book/#/ Technology, Specifications and Code of Practice details/22/0), which includes approximately 100 examples of For these contracts, quality control is carried out on materials in applications in various matters from around the globe. It is noted Among the responsibilities of the DAO Unit are the monitoring accordance with European and International Standards, type and that the feature was the sole feature in this edition on electrical of developments in power distribution technology, the drawing design testing takes place in independent testing laboratories, companies. up and updating of technical specifications for all Distribution routine and acceptance tests are held at the manufacturers’ labs, Network equipment and materials. The Unit is also responsible for materials are checked upon delivery to the storages and network testing is also carried out.

34 35 Annual Report 20 17

Vehicle Fleet Management Electronic Systems and Telecommunications In addition to the above, work continued on the installation of Construction Projects Security Systems, Access Monitoring Systems, Alarm Systems The DAO Unit is responsible for the management of the EAC’s The Electronic Systems and Telecommunications Department and Monitoring with Cameras at high risk installations, new In 2017, the following development and upgrading works were fleet of vehicles. deals with the design, installation, operation, maintenance, repair Fire Detection and Fire Extinguishing systems were installed in carried out on the Transmission Network: and upgrading of the EAC’s electronic, telecommunications, fire EAC buildings and new Security Guard service contracts were During the year under review, a large number of old cars was detection, fire extinguishing and protective security systems, signed for the Area Offices and Customer Service Centres across Upgrading/Dismantling of Substations replaced, while the process of replacing more old cars is and with maintaining strategic telecommunications partnerships Cyprus. scheduled, on the one hand to reduce maintenance costs and, as well as technical support for other units of the EAC and the • Ieratiki 132/11kV Substation in Nicosia on the other, to lower fuel consumption and the EAC’s carbon Cyprus TSO. Meters and Metering Equipment - MRTC In January 2017, work was completed on replacing a 31.5 MVA footprint, thereby making a serious contribution to the lowering transformer with a new 40 MVA one. of CO2 emissions and the limitation of environmental pollution. In 2017, the Department dealt with the maintenance, The main task of this Sub-unit is the management of all EAC development, upgrading and operation of the following systems: meters and relevant equipment. • Tseri 132/11kV Substation in Nicosia In an effort to promote the use of electric vehicles in Cyprus and In November 2017, the a 132kV 75MVAR conductor was to further contribute to reducing pollution, having installed • The EAC’s Optical Fibre Network, which interconnects its During the year under review, the following were achieved: installed and set into operation. a number of charging points across the island, the DAO Unit has Transmission Substations, Power Stations, Offices, Storages proceeded to purchase of six electric cars which will be used and other premises of the Authority. • Replacement of 3,825 electric low voltage meters with • Dasoupoli 132/11kV Substation in Nicosia on a daily basis by staff of the Area Offices and the Authority’s new electronic meters, primarily related to domestic and small The Substation’s automation system has been upgraded. Head Offices. • The SDH/PDH and Metro/Ethernet Optical Fibre commercial consumers of EAC. Telecommunications Systems, which uses digital multiplexers • Orounta 132/11kV Substation in Nicosia Area Offices - Construction and Maintenance to interconnect the EAC’s installations with the objective • Replacement of 984 old electronically programmed Low and/ The measuring device in the “Nikitas” circuit has been of catering for the requirements of the SCADA/EMS systems, or Medium Voltage meters, related to large (monthly) upgraded. The Construction and Maintenance Departments of the EAC’s Transmission Line Teleprotection, Telephony, Load commercial and industrial consumers of the EAC. Area Offices fall under the jurisdiction of the DAO Unit. Management (Ripple Control), IT and other services. • Alambra 132/11kV Substation in Nicosia • Programming and customization of 4,212 Low and/or Medium A 132kV 75MVAR conductor has been installed. It will be set The objective of the Construction and Maintenance Departments • The 10 G IP/MPLS Optical Fibre Telecommunications System, Voltage meters for the implementation of the new STOD into operation in early 2018. of the Area Offices is to offer the best possible customer service which is a fast, new generation telecommunications network tariffs, related to the meters of all large (monthly) commercial with the ultimate aim of providing an uninterrupted, reliable, high- that responds to the EAC’s data transfer requirements via its and industrial consumers of the EAC. • Moni 132/22kV Substation in Limassol quality supply of electricity. own optical fibre network. Construction work has begun on the above transmission substation and is expected to be completed in late 2018. The responsibilities of the Construction and Maintenance • The Supervisory Control and Data Acquisition and Energy Departments of the Area Offices include the expansion, Management System (SCADA/EMS), which controls the • Main Gate Primary Substation in Akrotiri reinforcement, improvement and maintenance of the Generation, Transmission and Primary Distribution Network TRANSMISSION SYSTEM Construction work on the Substation’s building has been Distribution Network, the installation of overhead power systems via the Energy Control Centre (ECC) and the Area completed. In Spring 2018 the electrical equipment will be fully lines, the construction of overhead and underground feeders Control Centres. OWNER (TAO) UNIT installed and set into operation. for connecting consumers, meter installation, cable laying/ connection, the construction and commissioning of distribution • The Load Management System (Ripple Control), which is The Transmission Network is the backbone of the EAC’s system, • Kolossi 132/11kV Substation substations, monitoring and supervision of contracted distribution used for controlled load management on customer premises connecting the power stations to the load centres. Development The Substation is undergoing upgrading to 22-11kV, which project work, the installation of Street Lighting in new network (solar heaters, centralised climate control systems, water works respond to the ever-increasing demand for electricity and, will be completed in Spring 2018 development or expansion areas, and the disconnection and pumps, etc.) plus street lighting, using the Transmission and at the same time, increase the reliability of the Transmission reconnection of consumers at the request of the Distribution Distribution Networks as a telecommunications tool. System. Overhead Power Lines/Underground Transmission Cables System Operator. Furthermore, annual/two-yearly distribution substation maintenance is undertaken, together with maintenance • The M2M Wireless Communication System, which is used for Transmission System planning, development and maintenance • Ypsonas-Trimiklini 132kV overhead power line of the overhead Distribution and Transmission Network, tree secure wireless communication with the equipment of the work is carried out by the Transmission System Owner, in Work on the middle department of the line in the Lania area pruning around the power lines and the inspection and repair of Virtual Power Plant, Electric Vehicle Charging Points, Smart accordance with the development plan and the terms of the remains at a standstill. earthing systems. Meters and remote SCADA/EMS terminals. Transmission Control Protocol and the Cyprus Transmission System Operator. • Vasilikos-Moni 132kV overhead power line At Area Office level, the Construction and Maintenance Sub-unit • The Telecommunications Networking that consists of Construction work of the above interconnection has begun also responsible for the detection, investigation and reparation of the EAC’s connected telephone systems in all locations and In addition, it carries out any other necessary tasks in accordance and it is expected to be completed in late 2018. Moreover, the faults, as well as the operation of Emergency Crews that deal with connections of the existing telephone network with the with the development plan and informs the Cyprus Transmission tender for the cable of the interconnection has been awarded immediate repairs and network-related consumer complaints on a Customer Contact Centre system. System Operator and CERA within a timeframe determined by a and the cable is expected to be installed within 2018. 24-hour basis. decision of CERA about the measures it intends to take for the • The Wireless Communication Network (Radiotelephones). implementation of the development plan in accordance with the • Vasilikos-Mari-Kophinou 132kV overhead power line Vehicle fleet management is also carried out at a local level. Transmission Control Protocol. Construction work of the above interconnection has begun and it is expected to be completed in late 2018. During the year in review, the installed capacity of the transmission substations increased by 8.5 MVA.

36 37 Annual Report 20 17

Transmission System Development Studies Other studies: Figure 6 The following studies have also been completed: In 2017 the following studies were prepared in collaboration with NEW DISTRIBUTION 103,3 the Transmission System Operator (TSO): • EAC’s Ten-Year Transmission System Development Plan PROJECTS EXECUTED 160,6 65,6 IN THE LAST FIVE YEARS 2017 2018 - 2027, which is sent to the CTSO in order to prepare 54,8 The following studies were completed and approved for Nicosia the Ten-Year Transmission System Development Plan 53 and the surrounding area: 2018-2027 by the CTSO. 156

97,9 • Revised study for the upgrade of the Moni 132/66kV • Study on the safe penetration of RES in conjunction with the 66,4 Transmission Substation to an open type G.I.S. Update of the National Action Plan RES 2015-2020. 38,5 2016 132kV 2x40MVA. The following studies are also planned: 39,2 The following studies are also planned: 39 123 • EAC’s Ten-Year Transmission System Development Plan • Replacement of 132kV GIS equipment at the Strovolos 2019-2028. 109,5 Substation. 123,5 37,4 • Continuous Modelling of the Transmission System and 2015 59,2 • New Vasilikos-Mari-Kophinou overhead power line Equipment and System Analysis. 55 (Rubus Twin). 176 • RES Penetration study 2012-30. • New Kophinou-Alambra overhead power line (Rubus Twin). 116,8 164,0 All Transmission System studies are carried out in collaboration 69,6 2014 • New “Casino” Transmission Substation in Zakaki. with the Cyprus Transmission System Operator (CTSO) which 59,8 is directly responsible for the operation and development of the 67 • Second circuit at the Athalassa Substation for connection with Transmission System. 186 the occupied areas. L.V. O/H LINES (km) 146,1 L.V. U/G CABLES (km) Transmission Network Maintenance 325,3 • Replacement of 300mm2 oil cables of the Strovolos-Ieratiki In the framework of creating a Project Management Environment MV U/G CABLES (km) 101,3 MV O/H LINES (km) 2013 interconnection with 800mm2 XLPE cables. across the complete range of Network works, all Transmission 101,6 G.M. TRANSFORMERS 136 Network maintenance work was planned, monitored and P.M. TRANSFORMERS 253 • “New Harbour” Primary Substation in Limassol managed as a single, unified, annual major Network project. It was 91% implemented.

38 39 Annual Report 20 17 non-regulated services management

Based on the Cyprus Energy Regulatory Authority Operational 5. Operation and maintenance of Photovoltaic Park in Tseri Unbundling Decision 04/2014, the Authority has proceeded with the establishment of the Non-Regulated Services Management, 6. The design, supply and installation of photovoltaic systems for comprising all non-regulated services of EAC. third parties

The Non-Regulated Services is directly under the administration 7. The use and exploitation of existing telecommunications of the General Manager of EAC. infrastructures for commercial Services, other than the use for the needs of the energy network (telecommunication network The Non-Regulated Services operating in a clear manner, rent to Strategic Partners) separately from the Core Regulated services and their pricing is done separately from these services in a fair and transparent way. 8. Management of the Rental Contracts for the Fuel Tanks at Management’s responsibility amongst other is the exploitation Vasilikos Power Station to Cyprus Organisation for Storage of expertise and infrastructure owned by EAC with an objective and Management of Oil Stocks to develop new profitable Services and the submission for the creation and development of new services. During this year the Non-Regulated Services provides consulting The EAC may carry out Services in fields related to the operation services as well as technical services to the following (in some and development of its assets, its technical capabilities, facilities, cases memorandum of understanding have been signed): services and expertise, with the consent of the Minister of Energy, Commerce, Industry and Tourism. Therefore, EAC always 1. University of Cyprus (study and installation of a photovoltaic receives advance permission from the Minister before deciding to park with a capacity of 5MW) engage the Non Regulated Services Management with a new activity. 2. The Ministry of Education and Culture and the Ministry of Energy, Commerce, Industry and Tourism (EAC will undertake The Non-Regulated Services cover a wide range of services, the installation of photovoltaic systems on the ceilings of which among others are the following: about 400 schools by the method of netting of measurements)

1. Inspection of internal electrical installations 3. Municipalities and Community Councils (study and installation of photovoltaic parks in their area of ​​responsibility 2. The maintenance / replacement of street lighting and photovoltaic systems in their premises)

3. Other contractors eg maintenance, installation and inspection 4. Post offices (installation of photovoltaic systems in their of third parties’ electrical equipment (eg cables, transformers, premises) relays, circuit breakers, etc.) Finally, the Management of Non-Regulated Services cooperate 4. The operation and maintenance of Desalination Plant at with ESCO AHK LTD (subsidiary of the Electricity Authority of Vasilikos Power Station Cyprus) to replace the existing High Pressure Sodium street lighting lamps with LED lamps (which contribute to both energy saving and better quality lighting) in Municipalities and Communities.

41 Annual Report 20 17 internal audit unit

The internal audit at EAC is conducted by the Internal Audit Unit The process included sample testing and calculation of the which is directly responsible to the Audit Committee. quantity received.

The basic activities of the Internal Audit Unit are as follows: It was established that the process for the supply of heavy fuel oil, was carried out as per instructions and regulations. Assurance activity Payments for the supply of heavy fuel oil and calculation of The internal auditor assures the Chairman and the Members of average price the Audit Committee, the General Manager, Executive Business Unit Managers and Managers at Area Offices and Power Stations All payment calculations for the supply of heavy fuel oil were that: checked by the Internal Audit Unit and found to be correct. In addition, the monthly fuel average price calculations were • Rules checked and found to be correct.

• Regulations In addition, the following planned and surprise audits were carried out in all Area Offices, Power Stations and Head Office: • Procedures

• Decisions of the Members of the Board and Management • Electricity bills in arrears

• EAC legislation etc. • Meter checks for Big Consumers are implemented without any delay and effectively. • Reports on illegal connections and damages to EAC meters and cut outs Consulting activity • Issuing of terms for the supply of electricity The internal auditor makes suggestions which aim to: • EAC Defined Benefit Plan • Improve the Organisation’s operations • Excavation works for the installation of underground cables • Add value • Surprise cash surveys • Bring a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and • Physical inventory taking at EAC stores based on sampling governance process. audit • Open tenders at EAC Head Office for the supply of materials, Main activities equipment and services

During 2017, the following main activities were carried out: • Local tenders for the supply of materials and services

Supply of Heavy Fuel Oil at Vasilikos and Dhekelia Power In general, the audit results for the above audits were satisfactory. Stations In a few cases, where weaknesses in the system of internal control were identified, suggestions were made for corrective Members of the Internal Audit Unit attended in 95 cases, the action. supply of heavy fuel oil at Vasilikos and Dhekelia Power Stations. 43 Annual Report 20 17 general management office

electricity bill by e-mail. At the same time, the money saved PUBLIC RELATIONS by EAC for not having to print and post electricity bills for customers opting for the e-bill service will be donated to one The Public Relations Department is responsible for planning of its chosen charities. integrated PR campaigns aimed at upgrading the EAC’s image, consolidating its corporate identity, improving its relations with Among the constitutive principles of the EAC is social various sections of the public, involving it in society and ensuring contribution. During 2017 the main axes of the Corporate Social that people are fully aware of the Authority’s activities and Responsibility program of the EAC was health environmental services and improving the EAC’s image. protection, sports, arts, music, projection of cultural monuments, support to various charitable associations and events. Also, like In 2017 the EAC continued to provide advisory services to all its every year the “Give Light to a Life” event was jointly organised by customers on matters of interest to them. As happens every year, the Cyprus Anti-Cancer Society and the Electricity Authority during 2017 lectures were given to organised groups and to EAC of Cyprus. customer groups on issues concerning energy saving and the safe use of electricity. The EAC also took part in the interactive Life with no memories is an empty life. With this message at heart exhibition “Your Planet Needs You” that all Elementary students the EAC visited once again the schools in the Karpas Peninsula visited. The SavEnergy exhibition was also jointly organized where it continued its financial support to the enclaved Greek with the Employers and Industrialists Federation and within the Cypriot children. framework of the Environmental Management System that the EAC follows, the EAC was involved in the “Let’s Do It Cyprus” campaign.

During the course of the year, EAC Public Relations officers LEGAL SERVICES visited various primary and nursery schools to talk to the children about the importance of saving energy and the dangers of The Legal Services Departments’ mission is to provide legal the unsafe use of electricity. Visits also took place at Vasilikos advice and support to the Directors, to the Basic Regulated Power Station, the Desalination Plant at Vasilikos and the Tseri Activities and the Non-Regulated Activities and to all other Photovoltaic Park by students, university students and other Common Services Departments, at the Head Offices and at organised groups. all EAC Area Offices, on all issues arising from the Electricity Authority of Cyprus activities. With the implementation of the new Tarrifs of EAC, the Public Relation Department organised a campaign in order to inform In cooperation with the EAC’s legal advisers, the Legal Services the public regarding the new tarrifs but also the new bill of the Department handles all cases against EAC in the relevant courts EAC that is now presenting in detail the cost for every regulated and legal action by EAC against third parties. services for Power Generation, Transmission, Distribution and Supply. Legal Cases Management

The Public Relations Department organised the new EAC In this context, during 2017 the Legal Services Department dealt promotional campaign “Go with the Flow”. The campaign is a with the following cases: social initiative that aims to support people in need and to protect the environment at the same time by inviting customers to register • Appeals against EAC by members of staff regarding simply and quickly through the EAC’s website to receive their promotions, appointments, transfers and other demands.

45 Annual Report 20 17

• Third Party Appeals against EAC regarding the installation government and private land and prepares the payment orders in • Preparation of the necessary documents for the issuing of EAC network on their immovable property. relation to rent revisions. CIVIL AND BUILDING WORKS of Tenders.

• Third Party Legal action against EAC demanding mandatory Lastly, the Department prepares consent documents for the sale The Civil and Building Works Subsection is under the Common • Evaluation of Tenders. orders or special or general damages regarding the placing of land in which Distribution Substations are located. The sale is Services Unit which is under the General Management Office. The and/or installation of network equipment (pylons, poles and done by auction from Banking Institutions under the Transfer and Civil and Building Works Subsection provides its services (both • Monitoring and Management of Contracts. other low or high voltage lines) on their immovable property. Mortgage of Property Law of 1965. Executive and Supportive) to the whole of the EAC Organisation. Particularly, the Subsection is involved in the whole of the • Management of Contractors Claims and Final Accounts. • Third Party Legal action against EAC demanding Insurance Department Building and Technical Works/Development Works, such as compensation for damage to their property caused by EAC’s Networks Business Unit Projects (Transmission and Distribution • Management of Consultants Claims. works or electricity supply or electricity interruption, voltage In the framework of securing its property and the interests of its of Electrical Energy), Development projects of the Generation fluctuations or loose connections. Human Resources, the Electricity Authority of Cyprus insures its Unit, the construction of buildings and the maintenance of EAC • Supervision of Maintenance/Upgrading Works for movable property, fixed assets and its employees’ interests. infrastructure. EAC existing buildings and infrastructure (Power Stations • Third Party Legal action by EAC over unpaid final infrastructure, Transmission Substations, Office Buildings, electricity bills. Further to the above, the Insurance Department deals with The executive services that are provided by the Civil and Building Customers Service Centers, Stores, etc.). cases of accidents involving EAC personnel, damage to property Works Subsection for the construction of new buildings, the • Legal action by EAC against third parties who have caused belonging to third parties and to EAC, the insuring of goods adaptation of spaces in existing building envelopes to suit new • Participation – as part of the Design Team - for Firefighting damage to its property and refuse to pay the amount required imported/exported by EAC, insurance cover for its vehicles and purposes, the preservation and maintenance of existing buildings, Systems for Transmission System Substations (Open/ to repair it. for employees travelling abroad on EAC business. are in relation to the following services: Closed Type).

• Third Party Referrals against EAC regarding compensation Legal Support and Advisory Services • Upgrading (both aesthetically and on the basis of energy • Provision of Consulting Services for Works regarding the that has either already been paid but the landowners have efficiency) and maintenance of the existing building premises Networks Overhead Power Line system and underground received it with all rights reserved, or not yet been paid for The Legal Services Department provides legal support, through of the EAC Head Offices. infrastructure. their immovable property which, according to the due participation in Evaluation and Working Groups, regarding process, was expropriated and requisitioned by EAC. the drafting of contracts and Memoranda of Cooperation with • Upgrading (both aesthetically and on the basis of energy • Services in relation to the vulnerability of Transmission System energy companies and/or other companies in the energy sector, efficiency) of the Lemesos Area Offices. Substations building premises vulnerability in a seismic event. Expropriations/Leasing/Property Disputes confidentiality agreements for the optimum legal coverage of EAC, and agreements regarding outstanding amounts owed to • The preparation of studies for the Maintenance/Reinstatement • The training and supervision of EAC’s personnel responsible The Legal Services Department maintains an archive of all the EAC as well as other projects. of buildings listed as historical heritage buildings; part of for Building Works for the Maintenance of the Overhead EAC’s property regarding its Offices, Stores, Power Stations, EAC’s property. Power Line Transmission Towers and Distribution Substations. Transmission and Distribution Substations. The Legal Services Department provides everyday legal support and advice, to EAC’s Basic Regulated Activities (Generation, • The establishment of Data Centre within the Head Offices Apart from the above, the Civil and Building Works Subsection When the expropriation of land is deemed necessary for reasons Supply, Distribution, Transmission), as well as to all Non- building premises. participates in the Networks (Transmission and Distribution of public interest, the Legal Services Department is responsible Regulated Activities and other EAC Units, on legal matters Systems) Business Unit Projects, in the Development works of for the entire process, from the preparation of a detailed report pertaining to customer complaints addressed to EAC, to CERA • Provision of technical support to the different Management the Generation Unit, and in the upgrading/maintenance of all EAC for approval by EAC’s Board of Directors to the publication of the and the Ombudsman, applications for damages, obtaining of Departments of Area Offices for current issues. building premises and infrastructures as noted below: relevant expropriation notices and requisition orders. consent, customer disconnections, connections and transfers, meter relocations, the provision of customer information and The main supportive services provided by the Civil and Building Transmission System Works The Legal Services Department obtains evaluation reports from illegal tampering with meters, among other issues. Works Subsection, are as follows: private valuers regarding the amount of compensation payable The Civil and Building Works Subsection is involved in all the by EAC to landowners whose property is affected by its network In addition to the above, the Legal Services Department carries • Preparation of Technical and Economic Feasibility Studies for stages of the design study for Transmission System Projects. (pylons and high voltage power lines). out disciplinary investigations in accordance with EAC’s Code of Projects (where required). During the year under review, the Civil and Building Works Discipline, it is responsible for the dissemination of new law and Subsection was involved in the preparation of design studies, Further to the above, the legal Services Department is responsible legal amendments within EAC and it is also responsible for the • Architectural Studies for ensuring the issuing of Planning drawings and documents for the issuing of Tenders for the for the payment of taxes to Municipalities and Community legal drafting for new Legislation concerning energy law. Permit. construction of Transmission System Substations, which included Councils, as well as filing objections to District Administrations works in relation to the Substations maintenance and extension and Municipalities where taxation is being disputed or considered In 2017 as a measure of compliance with EU General Data • Structural analysis and design and the preparation of (design study, supervision of works and Contract management), too high. Protection Regulation 679/2016 (GDPR) a member of the Legal Architectural and Structural Drawings for the issuing of and the supervision of the erection and maintenance of high Services was appointed Data Protection Officer (DPO) with a Building Permit. voltage Overhead Power Line Transmission Towers. Also, the Civil The Legal Services Department concludes a monthly check responsibility to consult EAC on data protection and to and Building Works Subsection was involved in the design, the for the rental of the Distribution Substations that are built on participate in EAC GDPR Working Group for the full compliance • Consultations with third parties (for matters regarding the preparation of drawings, specifications and Tender documents of EAC with GDPR. issuing of Planning Permit and Building Permit). for building and civil works in relation to the installation of security systems in Transmission Substations.

46 47 Annual Report 20 17

Distribution System Works Photovoltaic Parks), the development of terminals for the • The Building Monitoring System (B.M.S.). During 2017, in the context of continuous improvement, the storage of strategic oil supplies, the maintenance of Desalination following actions were carried out: The design study for the adaptation of the Head Offices building Works, etc. • Photovoltaic system monitoring. spaces for the establishment of SCADA Centre for the issuing of Integrated Management System the relevant Tender has been completed. Common Services • Access Cards. An audit of the Integrated Management system of EAC was The Civil and Building Works Subsection is responsible for The design study for the adaptation of spaces for the Head Office Archive Operations carried out by the Cyprus Certification Company (CCC). The Audit projects for the Maintenance/Improvement of existing premises, establishment of the new EAC Data Centre has been completed confirmed that EAC’s management system satisfies fully both the the Overhead Power Line system and underground infrastructure and the relevant Tender has been issued. The Civil and Building This concerns the computerisation of incoming and outgoing ISO 9000:2008 and the ISO 14001:2004 standards. and the upgrading of existing premises on the basis of aesthetics Works Department also provides specialized services (preparation correspondence for daily distribution and archiving. and energy efficiency. of drawings/documentation for the issuing of Tenders) in relation Cyprus Energy Regulator Authority (CERA) Performance to building and maintenance works for existing building premises, Purchase and Supply of Stationery and General Provisions Indicators The issuing of Tenders (including the preparation of all the the adaption of existing building premises and outdoor areas. necessary documents/drawings) for the construction and This relates to the supply of the Authority’s Units/Sections, Area The results of the system measuring all performance indicators maintenance works for the Distribution System Substations has Offices and Power Stations with the necessary stationery and related to Κ.Δ.Π 571/2005 (legislation regarding Custom Service) been completed. The Contract Management of these projects general supplies provisions. are calculated and sent on an annual basis both to CERA and to is undertaken by the Civil and Building Works Subsection. EAC’s top management. These results show that EAC is sensitive ADMINISTRATIVE SUPPORT and cares about its customer’s needs aiming continuously for Also, various building works have been carried out under the further improvement. supervision of the Civil and Building Works Subsection, such as the construction and maintenance of Distribution System The mission of the Administrative Support Section is to provide QUALITY ASSURANCE & Internal Audits Substations, the maintenance of Distribution System Stores as swift, reliable, professional and efficient logistic responsibility well as the supervision of EAC personnel for the maintenance for the management of building and office facilities of the EAC. BUSINESS EXCELLENCE Internal audits were conducted, according to the annual Audit of Distribution Substations. Mission of the Administrative Support Section, is the management plan, which covered most of the Critical processes of EAC. of the Central and Area Offices Archive, the stationery supplies The Electricity Authority of Cyprus, as the Organisation The aim was to identify areas for improvement and minimising Generation Unit Works and cleaning items throughout the EAC. responsible for the generation, transmission, distribution and the operational cost. The audit results were presented to the supply of electricity in Cyprus, fully understands its obligations key process owners and the relevant corrective and preventive The Civil and Building Works Subsection provided specialised Within this framework, the Administrative Support Section and responsibilities towards the Cypriot consumer. For this actions were agreed. services in relation to the building and maintenance works for the deals with: purpose, EAC is striving continuously towards improving existing building premises and infrastructure and for Development the quality of services it provides, while at the same time Updating of records in Intranet Portal Works of the Generation Unit. The Subsection provided the Contract Management minimising the unwanted effects of its activities on the necessary support in the preparation of design studies, drawings environment. To this effect EAC is implementing Quality and As part of EAC’s continuous improvement system, the systematic and documentation for the Maintenance and Improvement of • Agreements concerning the lease of buildings, parking lots Environmental management systems, certified to ISO9001:2008 updating of records and documents of the Management system is EAC Power Stations, in relation to the buildings premises, steel as well as warehouses for the needs of the EAC over Cyprus. και ISO14001:2004 standards respectively. continuing in the Intranet portal, after all the necessary approvals structures, infrastructure, marine works, Tank Farms etc. The by the Key process owners are completed. Civil and Building Works Subsection also provided services in • Canteen management agreements. Following the relevant decisions by the Board of Directors in relation to civil works and for the reconstruction of Seawater Flue July 2015 a new business unit has been created called Systems During 2017 an update of the Intranet Portal was carried out to Gas Desulphurisation Unit of Generation Unit 3, and natural gas • Maintenance agreements for the building of the Head Office. Management Business Unit which was later renamed Quality comply with the new organizational structure of EAC according conversion works. Assurance Unit. The Quality Assurance Unit’s mission is the to the CERA Regulatory Decision no. 4/2014 for the Operational Publication of Announcements/Notices implementation of relevant management systems based on Unbundling, which implements the corresponding provisions of Supply Department Works International Standards and Business Excellence Models that the EU. Announcements/Notices concerning tenders, job vacancies, will aid EAC to achieve its vision and mission. Implementing The design study, as well as the execution of works, for the interruptions to the power supply, etc. are published in the local management systems is critical to the strategy of the All documents on the Intranet Portal were moved from the old adaptation of spaces for the relocation of Strovolos Customer press and the Official Gazette of the Republic and are sent to the Organisation. environment to the new one to depict the value chain of EAC. Service Centre has been completed. Furthermore, works for CyBC for broadcast. the upgrading of the energy efficiency of the premises, and Main aims are standardization of works, continuous Target setting maintenance works for the Unit have also been completed. Head Office Building Maintenance improvements at operational level, environmental protection, A study for the upgrading of the existing Customers Services creating an environment of good health and safety procedures The procedure for target setting for EAC’s key performance Centres is being carried out. Maintenance of the Head Offices involves: for personnel, design and implementation of a performance indicators has been completed and the targets for all indicators management system benchmarking models, continuous risk have been approved by the Management Team. All Key Process Non-Regulated Business Projects • Ensuring that the building is clean. assessment aiming to reduce risk, business continuity and owners are in the process of finalising their key own process implementing the corporate social responsibility, fully aware of indicators, which are necessary to achieve the Corporate key The evaluation of buildings energy efficiency (ESCO), projects • Functionality regarding electrical/mechanical issues, repairs EAC’s responsibility towards society and within the context of process indicators and targets. involving renewable energy sources (such as the development of and office operations. EAC’s strategic objective towards sustainable development.

48 49 All work has been done in line with EAC’s medium term strategic Environmental Management Systems human objectives. In this way, all indicators for all EAC processes and procedures will be aligned aiming towards achieving the targets The project aiming to achieve ISO 14001:2004 certification set by the top management for the following year. In total thirty for Vasilikos Power Station was completed in March 2017. All resources four indicators have been selected and these indicators now form the operations at the Power Station is now certified to the ISO the General Manager’s scorecard. These indicators are divided 14001:2004 standard. into five dimensions: Customer, Financial, Processes, Learning management and Environment. Research and Technological Development (RTD)

Management Reviews Within EAC’s efforts to achieve an effective and, at the same time, viable development is the applied scientific research. Scientific Management reviews have been completed and presented to the research is the foundation block for the creation of innovative Management Council. These reviews include all business results and competitive technologies and methodologies. EAC research for 2016, regarding the Integrated Management system of EAC. and development activities have already reached a mature stage with significant success regarding the submission and successful Corporate Social Responsibility (CSR) evaluation of scientific research proposals. This success was based on the sufficient know-how and experience of EAC EAC has decided to implement a CSR system to cover all scientific personnel. Through the ongoing participation of EAC operations in the Area Offices, Head Office and Power Stations. in research programs, EAC achieves the partnerships with other As a result, project teams were identified and a relevant plan of technical institutions and research centres, the acquisition of action was devised and approved by the General Manager. useful experiences and the exchange of knowledge in specialised topics such as, environmental management, renewable Health and Safety energy sources, distributed generation, etc. This results in the development of management abilities regarding new The project aiming to integrate the Health and Safety system technologies and the acquisition of experiences for the benefit with the current EAC Management system (Quality and of the Cyprus society. Environment) has begun. In addition to the integration, the aim is the certification of the Health and Safety system with the OHSAS Staff belonging to all the Departments of EAC’s regulated 18001 standard, as a way to control the OH&S risks and align activities forms the team that deals with the research and them with the Organisational OH&S policy and objectives. development projects.

Design of EAC’s corporate strategy

Within this continuously evolving environment due to the enforcement of the memorandum by Troika and the liberalisation of the energy market in Cyprus, as well as the market competition EAC is continuously monitoring the implementation level of its strategic and business planning using the balanced scorecard.

All Business Units and Departments are aligned towards meeting the strategic goals and the implementation of EAC’s vision, contributing to the operational improvement and sustainability of the Organisation.

50 Annual Report 20 17

Priority was given to the management of the incomplete staffing No. of Trainees / Year HUMAN RESOURCES of both EAC as well as of the Cyprus Transmission System HUMAN RECOURSES Operator (TSO), since the Electricity Authority of Cyprus has the 3000 MANAGEMENT legal obligation of its staffing. DEVELOPMENT 2500 2222 The number of employees in post and their distribution by Education and Training The actions of the Human Resources Management concerned the 2000 category is shown in the table below. preparation and forwarding of staffing needs to the Ministry During 2017, 1 854 members of the staff attended 127 in-house 1500 of Energy Trade, Industry and Tourism and all actions pertaining courses and seminars, organized by the Authority’s Training to filling the vacant post of EAC’s General Manager and the 1000 School, which covered a wide range of topics. It is worth noting removal of the prohibition to fill other EAC vacant posts, were that HRM had also 341 additional participations of employees 500 2017 2016 treated with high priority. in various open educational programmes and training courses, 0 Professional 208 209 organized by local educational institutions and organizations, Furthermore, the Human Resources Management prepared drafts

Clerical 334 335 whilst 27 members of the professional and technical staff 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 on new Schemes of Services concerning TSO’s vacant posts. attended training courses abroad. In total 2 222 participants Technical 1 434 1 443 These new Schemes of Service were then examined by the attended training courses at an overall cost of €68,48 per Other 47 48 Professional Staff’s Schemes of Service Committee and finally employee (without taking into consideration the HRDA subsidy). received the Authority’s formal approval. Total 2 023 2 035 The in-house training courses and the training courses abroad were subsidized by the HRDA with the amount of €6.090. Total Training Cost / Year A number of other contacts of the Human Resources (Without HRDA Subsidy) «Other» employee refers to 47 employees who their conditions Management with the Unions, examined various labor related Recruitment/ Promotions 50000 of employment are regulated by a certain Collective Agreement. matters in a positive and constructive way, which in turn helped in maintaining good labor relations within the Organization. 40000 The Authority’s pensioners Following a council of Ministers decision and the subsequent approval by the Parliamentary Finance Committee, thirteen EAC’s Certification as a Gender Equality Employer 30000 The total number of pensioners at the end of the year who Managerial vacant posts were exempted from the provisions of the law that prohibits and filling of vacant posts and EAC 20000 received pension was 1 270 (including 9 missing persons since The Electricity Authority of Cyprus, as a Certified Gender Equality 139358 proceeded and filled the vacancies. the Turkish invasion οf 1974) compared to 1 286 at the end of the Employer is committed to forward actions aiming at promoting 10000 previous year. In addition 378 pensions were paid to widows and and strengthening gender equality, as well as integrating this Retirements/Termination of Employment orphans of deceased pensioners/employees compared to 349 at dimension in its strategic choices. 0 the end of the previous year.

During the year six employees reached the retirement age limit, 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 In this context and in order to inform EAC’s employees on gender four employees opted for early retirement and two employees Manpower indicators and Productivity equality issues, the following actions took place during 2017: were deceased. Variations in productivity are shown in Figure 7 (page 55) which • Training for the Equality Committees members and persons indicates the relationship between the Authority’s manpower, the responsible for managing indications of Harassment/ Sexual total units billed and the number of consumers during the ten year Cost (€) / Employee / Year Harassment on sexism issues, in a workshop, organized by (Without HRDA Subsidy) period 2008-2017. the Gender Equality Committee in Employment and Vocational 250 Training. SAFETY, HEALTH AND Τhe Management of employee sick leaves is a persistent task, 200 thus the Human Resource Management introduced new logistic • The organizing by the Ammohostos-Larnaka, local EAC WELFARE programs able to get data that would be analyzed in order to find committee of a presentation on Equality by the Professional 150 solutions that would better monitor absenteeism due to sickness. Collaborator to the Gender Equality Committee in Medical Care 100 Employment and Vocational Training. 68,48 During the year the EAC contributed €7.449.038,53 50 Furthermore, regarding the Authority’s commitment to promote (€7.443.668,89 in 2016) to EAC Employees Medical Fund, as among women employment awareness on male-dominated well as €51.260,00 to the Special Medical Fund set up to cover 0 occupations, EAC participated in a career fair organized by the expenses incurred in the treatment of serious cases, in Cyprus

INDUSTRIAL RELATIONS 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cyprus University of Technology (C.U.T). EAC’s representatives, and abroad. The gradual improvement of the economic climate more broadly presented the employment opportunities in the Organization and the consequent lifting of prohibitive legislative regulations for Undergraduate and Graduate students of the CUT. Also, on human resources procedures, enabled the Human Resources a representative of EAC’s HRM, presented the Organization’s Management to steer the solution of the accumulated human occupations and employment opportunities to the Latsia High resources issues. School students.

52 53 Annual Report 20 17

Benevolent Funds server and is accessible by all company staff, aiming to become Figure 7 a useful tool in the workplace. An introduction course on the The EAC’S Employee Benevolent Funds continued to function implementation of the “Health and Safety management system”, WORKFORCE INDICATORS satisfactorily during the year. The financial aid offered to needy which aims at the continuous development and improve-ment on members, pensioners or members of their families, exceeded occupational health and safety matters within the Organization, the sum of €215.000. This sum includes the monthly financial has been organised by the Safety Officers in collaboration with assistance offered by the EAC to ex-employees who retired prior the District and Power Stations management. to 1978 with Provident Fund benefits, as well as to their widows. It also includes the financial assistance to other ex-employees Health and Safety in the working environment 2800 due to the recognition of their previous service with the ex-private Electricity Companies after their works were undertaken by the The Safety Committees held regular meetings during the year, EAC. The members of the Funds, as at 31 December 2017 adhering to legislation requirements and gave their professional 2600 2 464 2 462

were 1 906. views to the Management for dealing with and solving various 2 419

problems, concerning health and safety issues. 2 339 2400 2 319 Welfare Funds 2 219 2 222

In order to ensure compliance with health and safety legislation 2 187 EAC Employees’ Welfare Funds continued to provide good and good practice we use the Health and Safety Management 2200 1 142 2 046 2 035

service to their members and their families throughout the year, System (HSMS) to perform internal auditing to identify 2 023 1 973 1 948 by offering accommodation facilities and other services. and remedy any health and safety performance shortfalls. 1 942 2000 1 899 1 890

Furthermore, the Safety Officers of the Organisation, in addition 1 878

Long Service Certificates and Awards to their daily duties, they investigated workplace accidents, 1 790 dangerous occurrences and hazardous malfunctions, monitored 1800 1 755 The following Awards were presented: the implementation of the Safety Management System (HSMS), studied Health and Safety plans submitted by the contractors 1600 • The EAC’s Long Service Certificates were awarded to four and made recommendations for their completeness and mployees, who retired during 2017 upon completing more functionality as far as the legislation requirements are concerned. than 20 years of service. Furthermore, they performed on site safety audits, which covered 1400 all the works carried out by the Electricity Authority and gave • The EAC’s silver metals were awarded to 14 employees who consultation on health and safety matters to the personnel. 1200 had completed 30 years of service. Additional audits were also carried out on sub-contracted projects to ensure, that they comply with the health and safety issues and legislations. 1000

Education/Training 800

OCCUPATIONAL HEALTH The technical personnel, who use mobile man lift equipment or AND SAFETY mobile cranes, have been trained and certified according to the 600 Cyprus legislation. Furthermore, a complete refreshing training on working with safety at height was delivered successfully Health and Safety Management 400 281 to members of the technical staff, who work in the overhead 274 278

PERMANENT AND 254 248 237 225 214 OTHER EMPLOYEES 211

construction of EAC’s District Area Officers. An additional training 217 The Electricity Authority of Cyprus, is pledged to achieve high IN ACTIVE SERVICE for safe working practices on roofs was organized for personnel 200 levels on safety standards, continuous improvement of Health NUMBER OF UNITS working on the installation of solar systems. BILLED PER EMPLOYEE and Safety performance indicators and compliance to applicable (thousand kWh) 0 legislative provisions, for the prevention of incidents which might CONSUMERS result in injury to its personnel or the general public. Towards Further training and seminars on Health and Safety matters have PER EMPLOYEE 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 this, the Company developed and implemented an effective and been organized during the year by the Safety Officers according appropriate Health & Safety Management System (HSMS), which to the needs of the Organisation. Furthermore, during the Safety serves as an important management tool for the im-plementation Week, fire drills have been organized in all District Areas Offices of the health and safety matters in the Organization. The Health & and Power Stations. Safety Management System (HSMS) is uploaded on EAC’s portal

54 55 information Personal Protective Equipment Occurrence Index shows the number of accidents in relation to the number of employees. The purchase of high quality Personal Protective Equipment (PPE) is ensured through the close cooperation between In relation with the previous year, the Frequency Index (F), the technology the Department of Occupational Safety and Health and the Occurrence Index (FO) and the Severity Index (S) have been Purchasing Department. The specifications of the PPE are varied as follow: continuously adapted to the latest European Standards and when The Frequency Index (F) from 6.3 to 7.8 ,the Occurrence Index needed, necessary revisions are made accordingly. (FO) 1 274 to 1 578 and the Severity Index (S) from 265 to 226 . department

Accidents

A total number of 31 occupational accidents occurred during ACCIDENT FREQUENCY RATE F 2017, which resulted in the injury of 32 people. Four of those 20 accidents were road accidents. All the accidents have been 18 reported and investigated by the Safety Officers and appropriate 16 measures, to prevent them from happening again in the future, 14 12 have been taken. 10 9,0 8,5 F 7,8 8 6,8 6,6 6,7 The graphs below show the variation of the three indexes, 5,8 5,8 6,3 6 5,5 Frequency Index (F), Severity Index (S) and Frequency of 4,2 4,3 4 Occurrence (FO) for the period 2006 to 2017. The Frequency index 2 shows the number of accidents in relation to the total worked 0 hours in the Organisation and the Severity Index shows the days 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YEAR lost in relation to the worked hours in the Organisation and the

ACCIDENT SEVERITY RATE S ACCIDENT OCCURATE RATE FO 600 2000 1736 1686 500 1600 1336 1578 385 400 366 1343 1200 1274 1218 1127 300 265 FO 892 249 S 276 800 254 200 229 226 125 176 190 153 400 100

0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017 YEAR YEAR

56 Annual Report 20 17

The mission of the Information Technology (IT) Department is to The consumers will also be able to choose one out of 6 charity Following an open tender, VMware infrastructure was upgraded select, provide and support IT systems, to provide Consulting institutions to which the money saved from postage cost will successfully with additional servers so as to support all the Services to the Authority, and to ensure that Information be donated. IT Applications, both on the Main and on the Back-up Technology is used as a strategic tool to achieve the EAC’s Computer Centers. business aims in a reliable, fast and efficient manner. The implementation of MobileFirst platform was successfully completed. The platform will secure the prerequisites for an Following an open tender, the purchase of a new upgraded In this framework, the IT Department deals with: improved management of the Authority’s Mobile Applications. Customers’ Call Center System was awarded.

• The provision of information services. The introduction of jBoss Fuse (Red Hat) in high availability The upgrade of Software System SAP to the Enhancement environment was successfully completed. JBoss Fuse will Package 7 (EHP7) ECC6 providing the capability of using state • The Identification and Evaluation of new IT technologies that constitute a flexible integration platform that will allow the direct of art development tools was successfully completed. will satisfy the Operational Needs of the Authority. interface in real time among the Authority’s Software Systems. The platform was successfully used to interface EAC’s first mobile Steps are being taken for the EAC’s compliance with the new • The development, implementation and maintenance of IT Application (under construction) with several of the Authority’s EU 2016/679 General Data Protection Regulation which comes software and systems. software (back-end systems). into effect as of May 25th 2018.

• Technical infrastructure services. Following an Open Tender, the development of the first Mobile Following an open tender, the installation of TrendMicro Application commenced, targeting the improvement of the Officescan was successfully completed on all the EAC’s • Security services and Administration. Customer service. The Mobile Application is expected to be computers, portables and towers, as well as on all the servers. completed in the first quart of 2018. The specific software protects computers, whether connected During the period January-December 2017: or not to the Organization’s network, from malicious software Modifications of Prometheus Software were carried out such as, trojans, worms, spyware, ransomware as well as from Legal regulations/changes for the Human Resources and successfully. The Software manages customer requests entered other yet known variations. Payroll systems were successfully completed and implemented through the Mobile Application (under construction). in the following: The Tender for INTERNET PERIMETER SECURITY The upgrade of the Filenet system catering for Document INFRASTRUCTUE was awarded. The tender purports in replacing • The integration of the Automatic Wage Adjustment and the Management has commenced at specific Organizational units the existing infrastructure of Perimeter Security with a new, and Basic Wage increases in the Payroll and is expected to be completed in the quart of 2018. The system more advance, one which will provide protection from threats will provide accessibility to documents via mobile devises (tablets stemming from the internet. The tender aims at the installation of • Pension Scheme (implementation of the new legislation & phones). security systems (firewalls) for the protection of the infrastructure -01.12.2015) within the IT Network (Data Center). The System Center Configuration Manager platform was The processes for the new Budget/Planning Consolidation successfully upgraded from version 2012 to “current branch” Specifications were prepared, and a tender was issued for the System Software – Labour Cost distribution in the various version which will be upgraded automatically with the latest introduction of the Meter Data Management (MDM) system. Business Units are in progress. available version. The management/support of the organization’s computers, via a central platform, becomes more efficient through A tender was issued for the creation of a new/modern The required adjustments in the existing EAC Software Systems this upgrade. Main Computer Center at the Head Office. The tender also have been carried out so as to accommodate the needs for covers the creation of a SCADA computer Center for the Operational Unbundling of the Authority according to the CERA The operating system of the Authority’s computers is being Distribution Network. regulatory decision 04/2014. upgraded from Windows 7 to Windows 10.

The design for the commencement of work concerning the The upgrade of Oracle Utilities CC&B software from version 1.5 to Operational Unbundling of the Customer Care and Billing of EAC version 2.4 was successfully completed and implemented. was completed. Separate accesses to the System were defined for the Users of Networks and Supply according to the CERA The introduction of new Tariffs in the Oracle Utilities CC&B was regulatory decision 04/2014. completed and put into use.

The modification of the EAC’s website so as to incorporate Following an open tender, a new cutting/folding/enveloping the registration of the consumers who wish to receive their machine was purchased, installed and put into use successfully. bills via email was successfully completed and implemented.

58 59 Annual Report 20 17

FINANCIAL STATEMENTS

The financial statements of the EAC for the year 2017 together with the supporting statements are set out in pages 67 to 122. The principal financial statistics for the ten year period 2008 - 2017 are summarized in pages 64 to 65.

Table 3

Consolidated income statement for the year ended 31 December 2017 and changes from previous year

% Increase 2017 (Decrease) INCOME €000 €000 Revenue from Sale of electricity 609.991 94.369 Consumers’ capital contributions 22.068 352 Income from Desalination 13.613 906 Other operating income 24.763 222 Finance income 6.047 345 676.482 96.194 Other losses net (78) 5.337 OPERATING COSTS (614.182) (122.999) Operating profit 62.222 (21.468) Finance costs (2.661) 3.924 Profit before tax 59.561 (17.544) Tax (8.871) 2.450 Net profit for the year 50.690 (15.094) Sales of electricity (million kWh) 4.495,6 137,1

corporate FINANCIAL RESULTS

The financial results for the year and the changes from the previous year are shown in Table No. 3 above. The income from sales finance unit of electricity for the year, totaled to €609.991.000 showing an increase of €94.369.000 or 18,3%. The total operating costs were €614.182.000 showing an increase of €122.999.000 or 25,0%. After accounting for finance costs amounting to €2.661.000, there was a profit before tax of €59.561.000 compared to a profit of €77.105.000 in the previous year. After the deduction of tax amounting to €8.871.000, the net profit was €50.690.000 (2016: €65.784.000).

ANALYSIS OF OPERATING COSTS Table 4 (page 62) gives an analysis of the operating costs according to each category. The principal factors underlying the changes are reviewed below: The average cost of fuel oil used by the EAC power stations decreased by 36,5% to €325,15 per metric tonne. The consumption increased by 0,05% to 1 033,1 thousand metric tonnes. As a result of the increase in price the fuel oil bill increased by €89.995.000 to €335.931.000. The purchase of electricity from third parties €28.213.000 increased by 40,7% due to the increase in fuel oil price. The total salaries and related costs amounted to €94.726.000 out of which €6.208.000 was capitalised in fixed assets and work in progress. The amounts capitalised relate to expenditure for development projects executed by the Authority’s employees during the year. An amount of €88.518.000 or 93,5% was charged to the income statement. The increase of €7.956.000 or 9,2% to the total salaries and related costs charge is mainly due to the increase in pension fund contribution. Materials services and other expenditure were €36.472.000 (increase of €5.508.000 or 17,8%). The depreciation charge was €97.822.000 (increase of €1.421.000 or 1,5%). 61 Annual Report 20 17

Figure 8 CAPITAL REQUIREMENTS AND SOURCES OF FINANCE

Income, operating costs & profit from operations (euro thousand) Capital expenditure during the year amounted to €45.434.000 compared with €36.923.000 in 2016 (increase of €8.511.000).

The amount paid for taxation during the year 2017 amounted to €1.586.000 (2016: €5.169.000). 759,816 2008 712,242 47,574 Loan and bank overdraft repayments amounted to €75.709.000 (2016: €55.441.000). 651,131 2009 595,095 56,036 The total financing requirements of €122.729.000 were covered from internal sources and consumers contributions. Table 5 below shows the financing requirements during the year and the sources of finance. 810,159 2010 698,062 112,097 Table 5 926,117 2011 841,649 84,468 Financing Requirements and Sources of Finance

1,185,139 2017 2016 2012 1,084,723 100,416 €000 % €000 % 907,777 2013 801,222 FINANCING REQUIREMENTS 106,555 Tax 1.586 1,3 5.169 5,3 776,268 2014 716,616 Capital expenditure 45.434 37,0 36.923 37,9 59,652 Loan repayments/bank overdraft 75.709 61,7 55.441 56,8 627,787 2015 553,900 122.729 100,0 97.533 100,0 73,887 SOURCES OF FINANCE 580,288 2016 496,598 Profit before tax 59.561 48,5 77.105 79,1 83,690 INCOME Depreciation less consumers’ contributions 75.754 61,7 74.685 76,6 676,482 OPERATING COSTS 2017 614,260 Impairement of property, plant and equipment - - 5.516 5,7 62,222 PROFIT FROM OPERATIONS Proceeds from disposal of fixed assets 4 - 153 0,2 Consumers’ contributions 22.578 18,4 17.633 18,1 Working Capital changes (35.168) (28,6) (77.559) (79,7)

Table 4 122.729 100,0 97.533 100,0

Analysis of Operating costs

FINANCIAL POSITION AT END OF YEAR Increase/(Decrease) 2017 over 2016 The historical cost of the assets employed at 31 December 2017 was €3.118.486.000 and the accumulated depreciation was €000 % €000 % €1.441.919.000 or 53,8% of the historic cost. The total net assets at 31 December 2017 were €1.922.382.000. Finance derived from Fuel 335.931 54,7 89.995 36,6 loans (€299.817.000 or 15,6%), other long term liabilities (€508.003.000 or 26,4%), and the balance (€1.114.562.000 or 58,0%) from own sources. Purchase of Electricity from third parties 28.213 4,6 8.154 40,7 Staff costs 88.518 14,4 9.573 12,1 A. MARANGOS CHAIRMAN Repairs and maintenance 21.326 3,5 8.121 61,5 Compensation for early retirement - - - - Cyprus Transmission System Operator fee 4.130 0,7 200 5,1 Cyprus Energy Regulatory Authority fees 1.770 0,3 27 1,5 Materials, services and other expenditure 36.472 5,9 5.508 17,8 Depreciation 97.822 15,9 1.421 1,5 TOTAL 614.182 100,0 122.999 25,0

62 63 Annual Report 20 17

Figure 9

EXPENDITURE 0,43% CONSOLIDATED BALANCE SHEET AT 31 DECEMBER (Euro Thousand) ASSETS (€THOUSAND) AS PERCENTAGE OF TOTAL EXPENDITURE Non current assets 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 6,87% 15,86% Property, plant and equipment 1.387.312 1.583.500 1.789.271 1.926.871 1.936.747 1.898.029 1.875.146 1.795.536 1.728.960 1.676.567 Trade and other receivables 1.800 1.845 2.302 2.028 2.242 1.702 631 322 239 5.432 FINANCE COST €2 661 (0,43%) 14,35% 1. 389.112 1.585.345 1.791.573 1.928.899 1.938.989 1.899.731 1.875.777 1.795.858 1.729.199 1.681.999 REPAIRS AND MAINTENANCE €21 326 (3,46%) 4,57% Current assets 325.719 259.762 329.501 372.388 518.233 460.411 406.043 506.460 594.582 637.941 PURCHASE OF ELECTRICITY FROM THIRD PARTIES €28 213 (4,57%) Total assets 1.714.831 1.845.107 2.121.074 2.301.287 2.457.222 2.360.142 2.281.820 2.302.318 2.323.781 2.319.940 3,46% MATERIALS, SERVICES AND OTHER EXPENDITURE €42 372 (6,87%) RESERVES AND LIABILITIES (€THOUSAND) SALARIES AND RELATED EXPENSES €88 518 (14,35%) Reserves DEPRECIATION €97 822 (15,86%) Revenue reserve 702.809 806.393 879.568 943.913 1.021.516 1.084.727 1.160.933 1.213.561 1.279.345 1.312.660 Actuarial loss reserve - - - - 22.063 4.763 (239.554) (155.071) (263.408) (213.653) FUEL OIL €335 931 (54,46%) 54,46% Capital reserve 15.555 15.555 15.555 15.555 15.555 15.555 15.555 15.555 15.555 15.555 718.364 821.948 895.123 959.468 1.059.134 1.105.045 936.934 1.074.045 1.031.492 1.114.562 Non current liabilities Borrowings 334.773 300.750 451.597 403.608 432.447 564.002 472.648 441.596 386.183 299.817 Deferred tax liabilities 98.056 38.402 24.479 27.762 36.103 51.596 57.066 65.804 75.673 82.958 Deferred income 382.973 406.250 428.704 441.808 447.544 443.403 437.020 429.443 425.008 425.045 815.802 745.402 904.780 873.178 916.094 1.059.001 966.734 936.843 886.864 807.820 Current liabilities 180.665 277.757 321.171 468.641 481.994 196.096 378.152 291.430 405.425 397.558 Total liabilities 996.467 1.023.159 1.225.951 1.341.819 1.398.088 1.255.097 1.344.886 1.228.273 1.292.289 1.205.378 Total reserves and liabilities 1.714.831 1.845.107 2.121.074 2.301.287 2.457.222 2.360.142 2.281.820 2.302.318 2.323.781 2.319.940

Table 6 Figure 10

PRINCIPAL FINANCIAL STATISTICS 2008 2017 PRICES PAID FOR FUEL OIL & AVERAGE PRICES USED FOR TARIFF PURPOSES (Fuel adjustment clause)

DURING THE FINANCIAL YEAR TO 31 DECEMBER 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 600 Units sold (million kWh) 4.556 4.656 4.782 4.595 4.356 3.890 3.915 4.036 4.358 4.496 Consumption in the turkish occupied area (million kWh) 9 8 8 7 7 6 6 2 3 4 550 Total units (million kWh) 4 565 4 664 4 790 4 602 4 363 3 896 3 921 4 038 4 361 4 500 Installed capacity (MW) 1 168 1 388 1 438 965 1 493 1 598 1 478 1 478 1 478 1 478 500 INCOME (€ THOUSAND) Sales of electricity 736.215 627.253 776.390 857.776 966.552 796.930 721.137 574.038 515.622 609.991 450 Consumers capital contributions 15.389 16.655 17.855 19.047 19.973 20.698 21.119 21.447 21.716 22.068 Temporary Generators Cost Recovered by the Republic of Cyprus - - - 17.229 31.702 - - - - - 400 Compensation from insurance - - - - 89.301 61.790 1.000 - - - Temporary surcharge - - - 19.858 61.680 8.047 - - - - 350 Other operating income 5.575 5.846 15.174 10.628 14.129 18.298 30.972 26.592 37.248 38.376 300 Finance income 2.637 1.377 740 1.579 1.802 2.014 2.040 5.710 5.702 6.047 Total Income 759.816 651.131 810.159 926.117 1 .185 .139 907.777 776.268 627.787 580.288 676.482 250 OPERATING COSTS (€ THOUSAND) Other losses net - - - - 76 3.324 21 291 5.415 78 200 Operating costs 652.539 523.569 622.669 747.364 830.561 659.626 620.328 455.885 394.782 516.360 Temporary Generators Cost - - - 17.229 35.302 - - - - - 150 Provision for the non recoverability of temporary generators cost - - - - 24.465 - - - - - Repairs at Vasilikos power station - - - - 104.508 43.867 1.023 231 - - 100 Depreciation 59.703 71.526 75.393 77.056 89.811 94.405 95.244 97.493 96.401 97.822 Total operating costs 712.242 595.095 698.062 841.649 1.084.723 801.222 716.616 553.900 496.598 614.260 50 Operating profit 47.574 56.036 112.097 84.468 100.416 106.555 59.652 73.887 83.690 62.222 Finance costs (19.310) (10.757) (10.243) (8.991) (13.960) (12.594) (11.199) (7.577) (6.585) (2.661) 0 Profit before tax 28.264 45.279 101.854 75.477 86.456 93.961 48.453 66.310 77.105 59.561 July July May May April April June June March March

Tax (7.933) 58.305 (10.440) (7.788) (8.935) (20.970) (6.477) (9.964) (11.321) (8.871) August August October October January January February February November November December December

Provision as a result of the Tax Council Decision - - (18.239) 1.896 ------September September Net profit for the year 20.331 103.584 73.175 69.585 77.521 72.991 41.976 56.346 65.784 50.690 2016 2017 RATIOS TO TOTAL INCOME Profit from operations (%) 6,3 8,6 13,8 9,1 8,5 11,7 7,7 11,8 14,4 9,2 FUEL AVERAGE PRICE FOR TARIFF PRICE OF GAS OIL PRICE OF IMPORTED HEAVY FUEL OIL Profit before tax (%) 3,7 7,0 12,6 8,1 7,3 10,4 6,2 10,6 13,3 8,8 PURPOSES

64 65 auditor’s report and financial statements

Report and consolidated financial statements 31 December 2017

Contents

Board of Directors and other officers 68 Consolidated Management Report 69 - 71 Reports of the Independent Auditor and Auditor General of the Republic 72 - 75 Consolidated income statement 76 Consolidated statement of comprehensive income 76 Consolidated statement of financial position 77 Consolidated statement of changes in equity 78 Consolidated statement of cash flows 79 Notes to the consolidated financial statements 80 - 122

67 Annual Report 20 17

Board of Directors and other officers Consolidated Management Report

1. The Board of Directors presents its report together with the audited consolidated financial statements of the Electricity Authority of Cyprus ( the “Authority”) and its subsidiaries Elektriki Ananeosimes Ltd, EAC LNG Investments Company Ltd, EAC Solar Thermal Power Ltd and ESCO AHK Ltd (together the ‘‘Group’‘) for the year ended 31 December 2017.

Principal activities

Board of Directors 2. The principal activities of the Group, which have not changed since last year, are the generation, transmission, distribution and supply of electricity in Cyprus. Following an amendment in the Law on 24 November 2000 the Authority has been empowered to engage in activities that are relevant with the exploitation and development of its assets, technical capabilities, installations, services, knowhow Chairman: Andreas Marangos (from 18.7.2016) and renewable energy sources. Othonas Theodoulou (until 30.6.2016) Group Changes Vice‑Chairman: Michalis Hadjipantela (from 18.7.2016) Demetra Karantoki (until 30.6.2016) 3. During the year there were no changes in the Group structure. The Authority does not intend to proceed with any acquisitions or mergers. Members: Elena Tsolakis (from 18.7.2016) Agni Shialarou (from 18.7.2016) Review of business developments, position and performance of the Authority’s business Charalambos Artemi (until 30.6.2016 and from 18.7.2016) Christina Zikkou (from 18.7.2016) 4. The profit of the Group for the year ended 31 December 2017 was €50.690 thousand (2016: €65.784 thousand). On 31 December 2017 the total assets of the Group were €2.319.940 thousand (2016: €2.323.781 thousand) and the net assets were €1.114.562 Yiannis Constantinides (from 18.7.2016) thousand (2016: €1.031.492 thousand). The financial position of the Group as presented in the consolidated financial statements Constantinos Costi (until 30.6.2016 and from 18.7.2016) is considered satisfactory. The Board of Directors does not anticipate any significant changes in the activities of the Group in the Michael Komodromos (from 18.7.2016) near future. Alexandra Pelagia‑Christodoulou (until 30.6.2016) 5. As at 31 December 2017 the Group had 2.023 employees (2016: 2.035) and 568.500 consumers of electricity (2016: 565.556). Michalis Hadjipantela (until 30.6.2016)

Nikolas Nikolaou (until 30.6.2016) Principal risks and uncertainties Loizos Loizou (until 30.6.2016) Giannos Athienitis (until 30.6.2016) 6. The principal risks and uncertainties faced by the Group are disclosed in notes 1, 3, 4 and 26 of the consolidated financial statements.

7. The Cypriot economy has recorded positive growth in 2016 and 2017 after overcoming the economic recession of recent years. The overall economic outlook of the economy remains favorable, however there are still downside risks emanating from the still high levels Legal Advisers: of non‑performing loans, the public debt ratio, as well as possible deterioration of the external environment for Cyprus. Ioannides Demetriou, Nicosia Auditors: 8. Management determined impairment provisions for financial assets carried at amortised cost using the “incurred loss” model required by International Accounting Standard 39 “Financial Instruments: Recognition and Measurement”. This standard requires recognition Auditor General of the Republic of impairment losses for loans and receivables that arose from past events and prohibits recognition of impairment losses that could PricewaterhouseCoopers Limited arise from future events, including future changes in the economic environment, no matter how likely those future events are. Thus final impairment losses from financial assets could differ significantly from the current level of provisions.

Financial risk management

9. The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk.

10. The Group’s risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by a central treasury department under policies approved by the Board of Directors. The treasury department identifies, evaluates and hedges financial risks in close co‑operation with the Group’s operating units.

68 69 Annual Report 20 17

Consolidated Management Report (cont’)

Market Risk Future developments of the Group

11. Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the 17. The Board of Directors of the Authority does not expect any major changes or developments in the operations, financial position and Group’s income or the value of its holdings of financial instruments. performance of the Group in the foreseeable future.

12. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while Results optimising the return. 18. The results of the Group for the year are presented on page 11. The net profit for the year is transferred to reserves. Foreign exchange risk Board of Directors 13. Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not 19. The members of the Board of Directors as at 31 December 2017 and at the date of this report, as well as changes during the year, the Group’s functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures with respect are presented on page 1. to the US Dollar but believes that any change in foreign exchange rates will not have a material effect on its results. 20. There were no changes in the assignment of responsibilities of the Board of Directors. With the approval of the Council of Ministers Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. there was an increase in the remuneration of the Board of Directors as from 1 January 2017.

Cash flow interest rate risk Events after the reporting period

14. Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s 21. Until the date of approval of these Consolidated Financial Statements an amount of €2.238.000 has been received from the insurance income and operating cash flows are dependent on changes in market interest rates. company as compensation for the loss suffered by the Flue Gas Desulphurization Plant of Unit 3 of Vasilikos Power Station from the fire incurred on 30 November 2016. The insurance company has accepted full responsibility for the restoration cost and has The Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow implemented a procedure for covering this cost. This process has not been completed by the date of approval of these Financial interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. See Note 3 for further disclosures Statements and additional amounts are expected to be received from the insurance company until the full restoration of the Plant. on cash flow interest rate risk. 22. There were no other material events after the reporting period, which have a bearing on the understanding of the consolidated Credit risk financial statements.

15. Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from Branches financial assets on hand at the reporting date. The Group has no significant concentration of credit risk. The carrying amount of financial assets represents the maximum credit exposure. 23. The Group did not operate through any branches during the year.

Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to Independent Auditors customers, including outstanding receivables and committed transactions. 24. The Independent Auditors, PricewaterhouseCoopers Limited, have expressed their willingness to continue in office. Sales to customers are settled in cash, direct debits or using major credit cards. See Notes 14 and 16 for further disclosures on credit risk. By order of the Board of Directors Management does not expect any losses from non performance by these counterparties.

Liquidity risk Andreas Marangos 16. Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially Chairman enhances profitability, but can also increase the risk of losses. See Note 3 for further disclosures on liquidity risk. 5 June 2018 Nicosia

70 71 Annual Report 20 17

Independent Αuditor’s report To: Board of directors of the Electricity Authority of Cyprus, Minister of Energy, Commerce, Industry and Tourism, Auditor General of the Republic

Report on the Audit of the Consolidated Financial Statements In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Opinion Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

We have audited the consolidated financial statements of the Electricity Authority of Cyprus (the “Company”), and its subsidiaries (the The Board of Directors is responsible for overseeing the Group’s financial reporting process. “Group”), which are presented in pages 76 to122 and comprise the consolidated statement of financial position as at 31 December 2017, and the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high Group as at 31 December 2017, and of its consolidated financial performance and its consolidated cash flows for the year then ended in level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, the requirement of the Electricity when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could Development Laws, Cap. 171, the requirements of the Laws Regulating the Electricity Market of 2003-2017 and the requirements of the reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. Cyprus Companies Law, Cap. 113. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. Basis for Opinion We also:

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated financial statements in fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Cyprus, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Other information • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures The Board of Directors is responsible for the other information. The other information comprises the information included in the made by the Board of Directors. Consolidated Management Report, but does not include the consolidated financial statements and our auditor’s report thereon. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the conclusion thereon. Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in or conditions may cause the Group to cease to continue as a going concern. the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a true Responsibilities of the Board of Directors for the Consolidated Financial Statements and fair view.

The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated the group audit. We remain solely responsible for our audit opinion. financial statements that are free from material misstatement, whether due to fraud or error. We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

72 73 Annual Report 20 17

Independent Αuditor’s report (cont’) Report of the Auditor General of the Republic To: Board of directors of the Electricity Authority of Cyprus, to the Electricity Authority of Cyprus Minister of Energy, Commerce, Industry and Tourism, Auditor General of the Republic

Report on Other Legal Requirements I have examined the foregoing report on the consolidated financial statements on pages 76 to 122, of the Electricity Authority of Cyprus for the year ended 31 December 2017, submitted by the appointed auditors in accordance with section 3(1) of the Public Corporate Bodies Pursuant to the additional requirements of the Auditors Law of 2017, we report the following: (Audit of Accounts) Laws of 1983 to 2007 and I am satisfied that it is appropriate.

• In our opinion, the Consolidated Management Report has been prepared in accordance with the requirements of the Cyprus Other matter Companies Law, Cap. 113, and the information given is consistent with the consolidated financial statements. This report has been prepared for the members of the Board of Directors as a body, the Minister of Energy, Commerce, Industry and • In our opinion, and in the light of the knowledge and understanding of the Group and its environment obtained in the course of the Tourism and the members of the House of Representatives, as a body, on the basis of the provisions of the Provision of Evidence and audit, we have not identified material misstatements in the Consolidated Management Report. Information to the Auditor General of the Republic and the House of Representatives Laws of 2002 to (Νο. 2) of 2016, Article 109(3) of the Fiscal Responsibility and Fiscal Framework Laws of 2014 to 2017 and of the Financial Audit of Statutory Bodies Laws of 1983 to 2007 and Other Matter for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come. This report, including the opinion, has been prepared for and only for the Board of Directors of the Electricity Authority of Cyprus as a body, the Minister of Energy, Commerce, Industry and Tourism, the House of Representatives, and the Auditor General of the Republic Dr Odysseas Ph. Michaelides in accordance with Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume Auditor General of the Republic responsibility for any other purpose or to any other person to whose knowledge this report may come to.

Nicosia Loizos A. Markides 25 September 2018 Certified Public Accountant and Registered Auditor for and on behalf of PricewaterhouseCoopers Limited Note: Greek version signed on 14/6/2018 Certified Public Accountants and Registered Auditors

Nicosia 5 June 2018

74 75 Annual Report 20 17

Consolidated income statement for the year ended Consolidated statement of financial position 31 December 2017 at 31 December 2017

2017 2016 2017 2016 Note €000 €000 Note €000 €000 Revenue 5 609.991 515.622 Assets Other operating income ‑ net 6 66.491 64.666 Non‑current assets Other losses ‑ net 7 (78) (5.415) Property, plant and equipment 15 1.676.567 1.728.960 Trade and other receivables 16 5.432 239 Operating costs 8 (614.182) (491.183) 1.681.999 1.729.199 Operating profit 62.222 83.690 Current assets Finance costs 10 (2.661) (6.585) Inventories 17 119.072 104.410 Profit before tax 59.561 77.105 Trade and other receivables 16 101.577 113.560 Tax charge 11 (8.871) (11.321) Greenhouse gasses emission allowances 349 - Financial assets at fair value through profit or loss 12 557 635 Profit for the year 50.690 65.784 Tax refundable 18 4.287 4.287 Short term deposits 19 378.687 358.233 Cash and cash at bank 20 33.412 13.457 637.941 594.582 Total assets 2.319.940 2.323.781

Reserves and liabilities Consolidated statement of comprehensive income for the year Reserves 1.114.562 1.031.492 ended 31 December 2017 Total equity 1.114.562 1.031.492 Non‑current liabilities Borrowings 21 299.817 386.183 Deferred tax liabilities 22 82.958 75.673 Deferred income 23 425.045 425.008 2017 2016 Note €000 €000 807.820 886.864 Current liabilities Profit for the year 50.690 65.784 Trade and other payables 24 128.222 118.865 Other comprehensive income/ (loss) Net defined benefit obligation 9 187.740 233.469 for the year, net of tax Tax liability 18 17.375 - Items that will not be reclassified Borrowings 21 41.680 31.023 to income statement in future periods: Deferred income 23 22.541 22.068 Remeasurements of post‑employment benefit obligations 9 49.755 (108.337) 397.558 405.425 Total comprehensive income/ (loss) for the year 100.445 (42.553) Total liabilities 1.205.378 1.292.289 Total reserves and liabilities 2.319.940 2.323.781

Other comprehensive income/ (expense) is presented after tax. The tax relating to each item of other comprehensive income These consolidated financial statements are signed today, 5 June 2018, as a result of the approval and decision of the Board of Directors. is shown in Note 11.

A. MARANGOS P. OLYMPIOS M. CHARALAMBOUS Chairman General Manager Executive Manager Finance

The notes on pages 80 to 122 form an integral part of these consolidated financial statements. The notes on pages 80 to 122 form an integral part of these consolidated financial statements.

76 77 Annual Report 20 17

Consolidated statement of changes in equity Consolidated statement of cash flows for the year ended 31 December 2017 for the year ended 31 December 2017

Actuarial 2017 2016 Capital losses Revenue Note €000 €000 reserve reserve reserve Total Note €000 €000 €000 €000 Cash flows from operating activities Profit before tax 59.561 77.105 Balance at 1 January 2016 15.555 (155.071) 1.213.561 1.074.045 Adjustments for: Comprehensive income Depreciation of property, plant and equipment 15 97.822 96.401 Profit for the year - - 65.784 65.784 Amortization of consumers’ capital contributions 23 (22.068) (21.716) Other comprehensive expenses Loss/(profit) from the sale of property, plant and equipment 7 1 (137) Remeasurement of post‑employment benefit obligation 9 - (108.337) - (108.337) Impairment charge ‑ property, plant and equipment 15 - 5.516 Total other comprehensive expenses - (108.337) - (108.337) Interest expense 10 4.163 5.794 Interest income 6 (6.047) (5.702) Total comprehensive expenses for the year - (108.337) 65.784 (42.553) 133.432 157.261 Balance at 31 December 2016 15.555 (263.408) 1.279.345 1.031.492 Changes in working capital: Balance at 1 January 2017 15.555 (263.408) 1.279.345 1.031.492 Inventories (14.662) (11.447) Comprehensive income Trade and other receivables 6.799 (24.380) Profit for the year - - 50.690 50.690 Greenhouse gasses emission allowances (349) - Other comprehensive income Financial assets at fair value through profit or loss 7 78 36 Remeasurement of post‑employment benefit obligation 9 - 49.755 - 49.755 Trade and other payables 9.397 16.893 Total other comprehensive income - 49.755 - 49.755 Defined benefit obligation 4.026 (7.798) 138.721 130.565 Total comprehensive income for the year - 49.755 50.690 100.445 Cash generated from operations Tax paid (1.586) (5.169) Contributions and distributions Net cash from operating activities 137.135 125.396 Defence contribution on deemed dividend distribution - - (17.375) (17.375) Cash flows from investing activities Total contributions and distributions - - (17.375) (17.375) Acquisition of property, plant and equipment 15 (45.434) (36.923) Balance at 31 December 2017 15.555 (213.653) 1.312.660 1.114.562 Short‑term deposits (20.454) (56.461) Proceeds from sale of property, plant and equipment 4 153 Additions to consumers’ capital contributions 23 22.578 17.633 (1) The Capital Reserve represents a government grant. Interest received 6.038 5.662 Net cash used in investing activities (37.268) (69.936) (2) Organizations which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, Cash flows from financing activities during the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Repayments of long term borrowings (75.709) (55.441) Special contribution for defence will be payable on such deemed dividend at the end of the period of two years from the end of the year of assessment Interest paid (4.203) (5.837) to which the profits refer. Special contribution for Defence was increased from 15% to 17% for the taxable year 2009 and 20% for taxable years Net cash used in financing activities (79.912) (61.278) 2010‑11 and decreased to 17% for taxable years 2012 ‑ onwards. The amount of this deemed dividend distribution is reduced by any actual dividend Net increase/ (decrease) in cash and cash equivalents 19.955 (5.818) paid out of the profits of the relevant year by the end of the period of two years from the end of the year of assessment to which the profits refer. This special contribution for defence is paid by the Group on behalf of the Government of Cyprus. Cash and cash equivalents at beginning of the year 13.457 19.275 Cash and cash equivalents at end of the year 20 33.412 13.457 (3) The actuarial losses reserve represents the cumulative losses from the Defined Benefit Plan that were recognized in the Consolidated Statement of other comprehensive income. The actuarial losses arise from changes in the present value of post‑employment benefit obligation resulting from experienced adjustments and the consequences of changes in actuarial assumptions.

The notes on pages 80 to 122 form an integral part of these consolidated financial statements. The notes on pages 80 to 122 form an integral part of these consolidated financial statements.

78 79 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017

1. General Information The consolidated financial statements have been prepared under the historical cost convention, except in the case of financial assets at fair value through profit or loss which are shown at their fair value and the defined benefit obligation which is recognized as plan assets, The Electricity Authority of Cyprus is a Public Corporate Body which was established in Cyprus under the Electricity Development Law less the present value of the defined benefit obligation. Cap.171 of 1952. It is managed by a Board of Directors, consisting of a Chairman, Vice‑Chairman and seven members, who are appointed by the Council of Ministers. The methods used for determining fair values are explained in detail in Note 3. Financial assets and liabilities and non financial assets and liabilities which are valued at historic cost are stated at amortized cost or historic cost, as appropriate, net of any relevant impairment. The address of the Authority’s Head Office is at 11 Amfipoleos Street, Strovolos, P.O.Box 24506, 1399 Nicosia, Cyprus. The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates and Pursuant to the above Law, the Group is engaged in the generation, transmission, distribution and supply of electricity. Following an requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher amendment in the Law on 24 November 2000 the Authority has been empowered to engage in activities that are relevant with the degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are exploitation and development of its assets, technical capabilities, installations, services and knowhow. disclosed in Note 4.

With the accession of Cyprus to the European Union and the opening up of the electricity market to competition, the Electricity Authority Adoption of new and revised International Financial Reporting Standards (IFRS) of Cyprus in preparing for its harmonization with the European Union has taken all the necessary steps in order to conform with Directive 2003/54/EC of the European Parliament and of the Council of 19th December 1996 concerning common rules for the internal market During the current year the Group adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to for electricity. its operations and are effective for accounting periods beginning on 1 January 2017. This adoption did not have a material effect on the accounting policies of the Group, except the below: The Group prepares separate financial statements for the activities of generation, transmission, distribution and supply of electricity and other activities in accordance to the Laws regulating the Electricity Market of 2003‑2017 and the relevant resolutions of the Cyprus Energy • Disclosure Initiative ‑ Amendments to IAS 7 (issued on 29 January 2016 and effective for annual periods beginning on or after 1 Regulatory Authority (CERA) regarding the functional and accounts unbundling. January 2017). As a result of this amendment, the Group has disclosed a reconciliation of movements in liabilities arising from financing activities. Refer to Note 20. Operating environment of the Group • At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations The Cypriot economy has recorded positive growth in 2016 and 2017 after overcoming the economic recession of recent years. The e effective for annual periods beginning after 1 January 2017, and have not been applied in preparing these financial statements. None overall economic outlook of the economy remains favorable, however there are still downside risks emanating from the still high levels of of these is expected to have a significant effect on the financial statements of the Group, except the below: non‑performing loans, the public debt ratio, as well as possible deterioration of the external environment for Cyprus. IFRS 9 “Financial Instruments: Classification and Measurement” (issued in July 2014 and effective for annual periods beginning on or Management determined impairment provisions for financial assets carried at amortised cost using the “incurred loss” model required after 1 January 2018). Key features of the new standard are: by International Accounting Standard 39 “Financial Instruments: Recognition and Measurement”. This standard requires recognition of impairment losses for loans and receivables that arose from past events and prohibits recognition of impairment losses that could i) Financial assets are required to be classified into three measurement categories: those to be measured subsequently at amortised arise from future events, including future changes in the economic environment, no matter how likely those future events are. Thus final cost, those to be measured subsequently at fair value through other comprehensive income and those to be measured impairment losses from financial assets could differ significantly from the current level of provisions. subsequently at fair value through profit or loss.

2. Summary of significant accounting policies ii) Classification for debt instruments is driven by the entity’s business model for managing the financial assets and whether the contractual cash flows represent solely payments of principal and interest (SPPI). If a debt instrument is held to collect, it may be carried at amortised cost if it also meets the SPPI requirement. Debt instruments that meet the SPPI requirement that are held in The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies a portfolio where an entity both holds to collect assets’ cash flows and sells assets may be classified as FVOCI. Financial assets have been consistently applied to all years presented in these consolidated financial statements unless otherwise stated. that do not contain cash flows that are SPPI must be measured at FVPL (for example, derivatives). Embedded derivatives are no longer separated from financial assets but will be included in assessing the SPPI condition. Basis of preparation iii) Investments in equity instruments are always measured at fair value. However, management can make an irrevocable election to The consolidated financial statements of the Electricity Authority of Cyprus have been prepared in accordance with International Financial present changes in fair value in other comprehensive income, provided the instrument is not held for trading. If the equity Reporting Standards (IFRSs), as adopted by the European Union (EU), the requirements of the Electricity Development Law, Cap. 171, the instrument is held for trading, changes in fair value are presented in profit or loss. Laws Regulating the Electricity Market of 2003‑2017 and the Companies Law Cap. 113. iv) Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged As of the date of the authorisation of the consolidated financial statements, all International Financial Reporting Standards issued by to IFRS 9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities the International Accounting Standards Board (IASB) that are effective as of 1 January 2017 have been adopted by the EU through designated at fair value through profit or loss in other comprehensive income. the endorsement procedure established by the European Commission, with the exception of certain provisions of IAS 39 “Financial Instruments: Recognition and Measurement” relating to portfolio hedge accounting and IAS 14 “Regulatory Deferral accounts“.

80 81 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

2. Summary of significant accounting policies (cont’) Adoption of new and revised International Financial Reporting Standards (IFRS) (cont’) Subsidiary undertakings

v) IFRS 9 introduces a new model for the recognition of impairment losses - the expected credit losses (ECL) model. There is a ‘three Subsidiary undertaking is an entity controlled by the Group. Control exists where the Group is exposed, or has rights, to variable returns stage’ approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules from its involvement with the investee and has the ability to affect those returns through its power over the investee. The subsidiary mean that entities will have to record an immediate loss equal to the 12‑month ECL on initial recognition of financial assets that undertaking is consolidated from the date on which control is transferred to the Group and is no longer consolidated from the date that are not credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment control ceases. All intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated as is measured using lifetime ECL rather than 12‑month ECL. The model includes operational simplifications for lease and trade is also the case with unrealized losses unless cost cannot be recovered. receivables. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is vi) Hedge accounting requirements were amended to align accounting more closely with risk management. The standard provides measured as the fair value of the assets given and equity instruments issued and liabilities incurred or assumed at the date of exchange. entities with an accounting policy choice between applying the hedge accounting requirements of IFRS 9 and continuing to apply Costs directly attributable to the acquisition are recognized in the profit or loss. Identifiable assets acquired and liabilities and contingent IAS 39 to all hedges because the standard currently does not address accounting for macro hedging. liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition vii) The Group is currently assessing the impact of the new standard on its financial statements and as of the date of issue of these is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement. financial statements the impact of the adoption of this standard is not known. Revenue recognition • IFRS 15, Revenue from Contracts with Customers (issued on 28 May 2014 and effective for the periods beginning on or after 1 January 2018). The new standard introduces the core principle that revenue must be recognised when the goods or services are Revenue comprises the fair value of consideration received or receivable for the sale of goods and services in the ordinary course of the transferred to the customer, at the transaction price. Any bundled goods or services that are distinct must be separately recognised, Group’s activities. Revenue is shown net of value added tax. and any discounts or rebates on the contract price must generally be allocated to the separate elements. When the consideration varies for any reason, minimum amounts must be recognised if they are not at significant risk of reversal. Costs incurred to secure The Group recognizes revenue when the amount can be reliably estimated, it is probable that future economic benefits will flow to the contracts with customers have to be capitalised and amortised over the period when the benefits of the contract are consumed. entity and when specific criteria have been met for each of the Group’s activities as described below: The Group is currently assessing the impact of the new standard on its financial statements and as of the date of issue of these financial statements the impact of the adoption of this standard is not known. (a) Sales of electricity

• Amendments to IFRS 15, Revenue from Contracts with Customers (issued on 12 April 2016 and effective for annual periods beginning Sales of electricity represent amounts receivable, based on consumption recorded by meters, net of V.A.T. Sales also include an estimate on or after 1 January 2018)*. The amendments do not change the underlying principles of the Standard but clarify how those of the value of units supplied to consumers between the date of the last meter reading and the year end, and this estimate is included in principles should be applied. The amendments clarify how to identify a performance obligation (the promise to transfer a good or a receivables in the consolidated statement of financial position. service to a customer) in a contract; how to determine whether a company is a principal (the provider of a good or service) or an agent (responsible for arranging for the good or service to be provided); and how to determine whether the revenue from granting a license (b) Interest Income should be recognised at a point in time or over time. In addition to the clarifications, the amendments include two additional reliefs to reduce cost and complexity for a company when it first applies the new Standard. The Group is currently assessing the impact of Interest income is recognized on a time proportion basis using the effective interest method. the amendments on its financial statements and as of the date of issue of these financial statements the impact of the amendments is not known. (c) Consumers’ capital contributions

• IFRS 16 “Leases” (issued on 13 January 2016 and effective for annual periods beginning on or after 1 January 2019). The new The Group accepts applications for extension of its network in areas not yet covered by the existing network by individuals and legal standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. All leases result in the entities. Furthermore the Group accepts applications for additional load from the existing network. In both cases the Group charges the lessee obtaining the right to use an asset at the start of the lease and, if lease payments are made over time, also obtaining financing. applicants with the construction cost. Accordingly, IFRS 16 eliminates the classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model. Lessees will be required to recognise: (a) assets and liabilities for all leases with The fact that the cost is recovered from applicants results in not having to be recovered by consumers through electricity tariffs. a term of more than 12 months, unless the underlying asset is of low value; and (b) depreciation of lease assets separately from Otherwise this cost would have been included in tariffs and consumers would have been billed for the consumption of electricity with interest on lease liabilities in the income statement. IFRS 16 substantially carries forward the lessor accounting requirements in IAS higher prices. All network extension applicants are charged with capital contributions and all consumers are billed with the same tariffs. 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group is currently assessing the impact of the new standard on its financial statements and as of the date of Applicants are ensured of the right of permanent access to the network for an unlimited period of time. The Group is committed to provide issue of these financial statements the impact of the adoption of this standard is not known.

82 83 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

2. Summary of significant accounting policies (cont’) Revenue recognition (cont’) working life of the employees. Additionally, from 2015 a recovery plan was effected which provides that an annual deficit payment should (c) Consumers’ capital contributions (cont’) be made to the Pension Plan. From October 2011 under the first package of austerity measures, the members of the defined benefit plan are making contributions amounting to 3%. access for an unlimited period of time. Capital contributions represent the price for this continuous service and hence income is shown as deferred income and is gradually released to the consolidated income statement over a period identical to that of the assets constructed/ IAS 19 does not specify whether an entity should distinguish current and non‑current portions of assets and liabilities arising from acquired for this purpose, and which have an average life of 33 1/3 years. This period is considered a reasonable approximation for post‑employment benefits. The Group recognizes the net defined benefit obligation as current liability because a distinction between calculating the period of the customer relationship. current and non‑current portion arising from defined benefit plans may sometimes be arbitrary.

(d) Revenue from Desalination The Authority’s contributions to the defined contribution plans are charged to the consolidated income statement in the year to which they relate. Revenue from Desalination represents the sale of desalinated water to the Water Board Authority in accordance with the supply as recorded by meters net of VAT. Sales also include an estimate of the value of metric tonnes supplied between the date of the last invoice Current and deferred income tax and the end of the year and this estimate is included in receivables in the consolidated statement of financial position. The tax expense for the period comprises current and deferred tax including interest and penalties. Tax is recognized in profit or loss, Foreign currency translation except to the extent that it relates to items recognized in other comprehensive income. In this case, the tax is also recognized in other comprehensive income. (a) Functional and presentation currency The current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the country in Items included in the Group’s consolidated financial statements are measured using the currency of the primary economic environment which the Group operates and generates taxable income. The Group periodically evaluates positions taken in tax returns with respect in which the Group operates (‘‘the functional currency’‘). The consolidated financial statements are presented in Euro (€), which is the to situations in which applicable tax regulation is subject to interpretation. If applicable tax regulation is subject to interpretation, it Group’s functional and presentation currency. establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities.

(b) Transactions and balances Deferred income tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. or substantially enacted until the reporting date and are expected to apply when the related deferred income tax asset is recognized or the deferred income tax liability is settled. All foreign exchange gains and losses are presented in profit or loss within ‘‘finance costs’‘. Deferred income tax assets are recognized to the extent that it is probable that future taxable profits will be available against which the Employee benefits temporary differences can be utilised.

The Group operates a defined benefit plan, comprising of a lump sum amount at the termination of employees services and Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current post‑employment benefits, and various other defined contribution plans, the assets of which are held in separate trustee‑administered tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on the funds. These plans are mainly funded by the Group. Authority where there is an intention to settle the balances on a net basis.

The net expense/(income) from interest and current service cost is charged to the income statement over the period of the expected All property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly related service lives of the employees and is estimated annually by independent actuaries, using the projected unit method, in order to create to the acquisition of property, plant and equipment. For projects carried out by external contractors, cost is based on the value of work sufficient reserves. The Group determines the net interest expense/(income) on the net defined benefit obligation (asset) for the period executed and certified by engineering consultants. For projects carried out by the Group’s own staff, cost comprises of materials, labour by applying the discount rate used to measure the defined benefit obligation (asset), taking into account any changes in the net defined and related overheads. benefit obligation (asset) during the period as a result of contributions and benefit payments. Remeasurements of the net defined benefit obligation, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if Major spare parts and stand‑by equipment are accounted for as property, plant and equipment when the Group expects to use them any, excluding interest), are recognized immediately in other comprehensive income. during more than one period.

A provision for the contribution to the defined benefit scheme is made on a monthly basis so that adequate reserves are created during the Land is not depreciated. Depreciation on other property, plant and equipment is calculated using the straight‑line method to allocate

84 85 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

2. Summary of significant accounting policies (cont’) Property, plant and equipment (cont’) Impairment of non‑financial assets their cost to their residual values, over their estimated useful lives. The estimated useful lives of the major elements of property plant Assets that have an indefinite useful life, including goodwill, are not subject to amortization and are tested annually for impairment. Assets and equipment are as follows: (except inventory and deferred tax) that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non‑financial assets, other than goodwill, that have suffered an impairment are Years Years reviewed for possible reversal of the impairment at each reporting date. Power station buildings 30 Meters 15 Impairment loss is recognized in the profit or loss. Other buildings 35 Motor vehicles 7

Power station plant Furniture, fixtures and office equipment 10 Financial assets and machinery 25 Tools and instruments 10 Other plant and machinery 25-30 Computer hardware 5 (i) Classification Lines and cables 35-40 Computer software 3 The Group classifies its financial assets as financial assets at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. initial recognition.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its • Financial assets at fair value through profit or loss estimated recoverable amount. This category has two sub categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if acquired principally for the purpose of selling in the short term. Financial Expenditure for repairs and maintenance of property, plant and equipment is charged to the consolidated income statement of the year assets designated as at fair value through profit or loss at inception are those that are managed and their performance is evaluated on in which they were incurred. The cost of major renovations and other subsequent expenditure are included in the carrying amount of the a fair value basis, in accordance with the Group’s documented investment strategy. Information about these financial assets is asset or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item provided internally on a fair value basis to the Group’s key management personnel. Assets in this category are classified as current will flow to the Group and the cost of the item can be measured reliably. assets if they are either held for trading or are expected to be recognized within twelve months of the reporting date.

Gains and losses on disposal of property, plant and equipment is determined by comparing proceeds with the carrying amount and these • Loans and receivables are included in ‘‘other gains/losses‑net’‘ in the consolidated income statement. Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than Greenhouse Gas Emission Allowances twelve months after the reporting date. These are classified as non current assets. The Group’s loans and receivables comprise trade and other receivables, and cash and cash at bank in the consolidated statement of financial position. Based on the Cyprus Law for the Scheme of Greenhouse Gas Emission Allowance Trading, N.132(I)/2004, greenhouse gas emission allowances are allocated to the various operators (companies) with the objective of reducing the level of pollution in the environment. (ii) Recognition and measurement

Each operator, whose annual emissions exceed the number of emission allowances allocated for the specific year, is obliged to buy as Regular way purchases and sales of financial assets are recognized on the trade date which is the date on which the Group commits to many emission allowances as required to cover the shortage and in addition to pay a penalty fee for each eco of excess emission. purchase or sell the asset. Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value and Granted CO2 emission allowances are initially recognized at nominal value (nil value) when the Group is able to exercise control over transaction costs are expensed in profit or loss. Financial assets are derecognized when the rights to receive cash flows from the financial these rights. Purchased CO2 emission allowances are initially recognized at cost (purchase price) within intangible assets. A liability is assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. recognized when the level of emissions exceeds the level of allowances granted. The liability includes the total cost of the purchased allowances and any additional deficit at the current market value of the allowances as at the reporting date. Movements in the liability are Loans and receivables are carried at amortized cost using the effective interest method. recognized in the consolidated statement of profit or loss. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in The intangible assets are surrendered at zero value at the end of the compliance period reflecting the consumption of economic benefit. profit or loss within ‘other gains/(losses) net’ in the period in which they arise. Dividend income from financial assets at fair value through Surplus emission allowances can be carried forward and off‑set future shortages (up to the end of the compliance period) or be sold. profit or loss is recognized in the profit or loss as part of other income when the Group’s right to receive payments is established. Proceeds from the sale of surplus emission allowances are recognized upon the sale of these rights.

86 87 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

2. Summary of significant accounting policies (cont’) Financial assets (cont’) value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in profit or loss within operating costs. When a trade receivable is (iii) Impairment of financial assets uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off The Group assesses at each reporting date whether there is objective evidence that a financial asset, other than financial assets at fair are credited against operating costs in profit or loss. value through profit or loss, or a group of financial assets, other than financial assets at fair value through profit or loss, is impaired. Provisions A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognized for future operating losses. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre tax rate that observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due conditions that correlate with defaults. to passage of time is recognized as interest expense. For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s Cash and cash equival original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined Cash and cash equivalents include cash in bank and in hand, short term deposits held at call with banks with average maturity up to 90 under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an days and bank overdrafts. Short term bank deposits with maturity of 3‑12 months are included in short‑term bank deposits and within observable market price. investing activities for cash flow purposes. In the consolidated statement of financial position bank overdrafts are shown within borrowings in current liabilities. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized Borrowings impairment loss is recognized in the profit or loss. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Leases Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings, using the effective interest method, unless they are directly attributable to the acquisition, construction or production of a Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. qualifying asset, in which case they are capitalised as part of the cost of that asset. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight‑line basis over the period of the lease. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that Inventories it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment (for liquidity services) and amortised Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. over the period of the facility to which it relates. Cost includes purchase cost, transport and handling costs. It excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business less applicable variable selling expenses. Provision is made for damaged, deteriorated, obsolete and Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. unusable items where appropriate. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non‑cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or Trade receivables finance costs.

Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. A substantial modification of the terms of an existing financial liability or a part of it is accounted for as an extinguishment of the original If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. financial liability and the recognition of a new financial liability. Any gain or loss on extinguishment is recognised in profit or loss except to If not, they are presented as non‑current assets. the extent that it arises as a result of transactions with shareholders acting in their capacity as shareholders when it is recognised directly in equity. The terms are considered to be substantially different if the discounted present value of the cash flows under the new terms, Trade receivables are recognized initially at fair value and subsequently measured at amortized cost, using the effective interest method, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the discounted present value of the remaining cash flows of the original financial liability. Any costs or fees incurred are recognised as part of Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the the gain or loss on the extinguishment. debtor, probability that the debtor will enter bankruptcy or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present

88 89 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

2. Summary of significant accounting policies (cont’) Borrowings (cont’) • Foreign exchange risk Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Foreign Borrowing costs are interest and other costs that the Group incurs in connection with the borrowing of funds, including interest on exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not borrowings, amortisation of discounts or premium relating to borrowings, amortisation of ancillary costs incurred in connection with the the Group’s functional currency. The Group is exposed to foreign exchange risk arising from various currency exposures with respect arrangement of borrowings, finance lease charges and exchange differences arising from foreign currency borrowings to the extent that to the US Dollar but believes that any change in foreign exchange rates will not have a material effect on its results. they are regarded as an adjustment to interest costs. Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, being an asset that necessarily takes a substantial period of time to get ready for its intended use or sale, are capitalised as part of the cost of that asset, The net foreign exchange difference credited/ debited to the consolidated income statement amounts to €(1.502.000) (2016: when it is probable that they will result in future economic benefits to the Group and the costs can be measured reliably. Borrowings are €791.000) and relates to normal operating and financing activities (Note 10). classified as current liabilities, unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date. The Group’s exposure to foreign currency risk was as follows:

Trade and other payables United States Trade and other payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of the Dollars Group’s business. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating 31 December 2017 €000 cycle of the Group if longer). If not, they are presented as non‑current liabilities. Assets Short term deposits 11.746 Trade and other payables are recognised initially at fair value and subsequently measured at amortized cost using the effective interest method. 11.746 Liabilities Comparatives Suppliers (32.532) Amount available for interpleader proceedings (12.717) Where necessary, comparative figures have been adjusted to conform to changes in presentation in the current year. (45.249) 3. Financial risk management Net foreign currency exposure (33.503)

(i) Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), United States credit risk and liquidity risk. Dollars 31 December 2016 €000 The Group’s risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse Assets effects on the Group’s financial performance. Risk management is carried out by a central treasury department under policies approved Short term deposits 13.165 by the Board of Directors. The treasury department identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. 13.165 Liabilities • Market Risk Suppliers (20.756) Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s Amount available for interpleader proceedings (14.277) income or the value of its holdings of financial instruments. (35.033) The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising Net foreign currency exposure (21.868) the return.

90 91 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

3. Financial risk management (cont’) Foreign exchange risk (cont’) Sensitivity analysis

Sensitivity analysis A decrease of 100 basis points in interest rates at 31 December 2017 and 2016 would have increased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. For a decrease A 10% strengthening of the Euro against the following currencies at 31 December 2017 and 2016 would have increased equity and profit of 100 basis points there would be an equal and opposite impact on the equity and profit or loss. or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. For a 10% weakening of the Euro against the relevant foreign currency at 31 December 2017 and 2016, there would be an equal and opposite impact on the equity and profit or loss. Equity Profit or loss 2017 2016 2017 2016 Equity Profit or loss €000 €000 €000 €000 2017 2016 2017 2016 Variable rate instruments 2.985 3.647 2.985 3.647 €000 €000 €000 €000 2.985 3.647 2.985 3.647 United States Dollars 2.931 1.914 2.931 1.914 2.931 1.914 2.931 1.914 The Management of the Group monitors the interest rate fluctuations on a continuous basis and acts accordingly.

• Credit risk Cash flow interest rate risk

Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group’s financial assets on hand at the reporting date. The Group has no significant concentration of credit risk. income and operating cash flows are dependent on changes in market interest rates.

The carrying amount of financial assets represents the maximum credit exposure. The Group’s interest rate risk arises from long term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. At 31 December 2017, if interest rates on Euro denominated borrowings had been 0,1% higher/lower with all other variables held constant, post tax profit for the year would have been €341.093 (2016: €416.764) lower/higher, mainly as a result of higher/lower interest expense on Sales to customers are settled in cash, direct debits or using major credit cards. See Note 16 for further disclosures on credit risk. floating rate borrowings.

Management does not expect any losses from non performance by these counterparties. At the reporting date the interest rate profile of interest‑ bearing financial instruments was:

• Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances 2017 2016 €000 €000 profitability, but can also increase the risk of losses. Fixed rate instruments The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting Financial assets 378.687 358.233 date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due Financial liabilities (404) (442) within 12 months equal their carrying balances as the impact of discounting is not significant. Variable rate instruments Financial liabilities (341.093) (416.764) 37.190 (58.973)

92 93 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

3. Financial risk management (cont’) Liquidity risk (cont’) (iii) Fair value estimation

Between Between More The fair values of the Group’s financial assets and liabilities approximate their carrying amounts at the reporting date. Less than 1 and 2 2 to 5 than 1 year years years 5 years The table below analyses financial instruments measured in the statement of financial position at fair value by valuation method. Different €000 €000 €000 €000 levels are defined as follow: At 31 December 2016 Borrowings (Capital and interest) 36.239 56.937 143.503 278.278 • Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). Trade and other payables* 107.671 - - - 143.910 56.937 143.503 278.278 • Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) At 31 December 2017 or indirectly (that is, derived from prices) (Level 2). Borrowings (Capital and interest) 47.838 46.717 122.793 193.029 Trade and other payables* 121.442 - - - • Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). 169.280 46.717 122.793 193.029

*Excluding statutory liabilities and deferred income. Level 1 Level 1 2017 2016 The Group has procedures with the object of minimising such losses such as maintaining sufficient cash and other highly liquid current €000 €000 assets and by having available an adequate amount of committed credit facilities. Assets (ii) Capital risk management Financial assets at fair value through profit or loss: Equity securities 557 635 The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. Total financial assets measured at fair value 557 635

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘current and non current borrowings’ as presented in the consolidated statement of financial position less short term deposits and cash and cash equivalents. Total capital is calculated as ‘equity’ (‘Reserves’ and ‘Deferred Income’ as shown in the consolidated statement of financial position) plus net debt. The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, During 2017, the Group’s strategy, which was unchanged from 2016, was to maintain the gearing ratio within 0% to 10%. The gearing ratio at 31 December 2017 and 2016 was as follows: or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily equity investments listed on the Cyprus Stock Exchange classified as trading securities.

The fair value of financial instruments that are not traded in an active market (for example, unlisted equity securities) is determined by using 2017 2016 €000 €000 valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included Total borrowings (Note 21) 341.497 417.206 in Level 2. Less: Short term deposits (Note 19) (378.687) (358.233) Less: Cash and cash equivalents (Note 20) (33.412) (13.457) If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

Net debt (70.602) 45.516 Total equity 1.562.148 1.478.568 Total Capital as defined by Management 1.491.546 1.524.084 Gearing ratio (5%) 3%

94 95 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

3. Financial risk management (cont’)

(iii) Fair value estimation (cont’) (ii) Tax

Specific valuation techniques used to value financial instruments include: Significant judgment is required in determining the provision for income taxes. These are transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax issues based on estimates of whether additional • Quoted market prices or dealer quotes for similar instruments. taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets in the period in which such determination is made. • Adjusted comparable price‑to‑book value multiples. If the actual final outcome differed by 10% from Management’s estimates then the Group would need to increase its current tax liabilities • Other techniques, such as discounted cash flow analysis. by €176.200 (2016: €171.100) if the final outcome was not in the Group’s favour.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of (iii) Defined Benefit Plan future events that are believed to be reasonable under the circumstances. The present value of the Defined Benefit Plan obligation, depends on several factors that are determined based on the actuarial valuation 4. Critical accounting estimates and judgements by using various assumptions and estimates. The assumptions and estimates used for determining the defined benefit cost and the obligation/asset, includes the discount rate, the expected increase of salaries and pensions. Such assumptions and estimates are subject to considerable uncertainty due to the long term nature of the plan. The preparation of consolidated financial statements in accordance with IFRSs requires from Management the exercise of judgment, to make estimates and assumptions that influence the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors 5. Revenue from sale of electricity that are deemed to be reasonable based on knowledge available at that time. Actual results may deviate from such estimates. Sale of electricity does not include the consumption of Turkish Cypriots in the areas of the Republic of Cyprus where the Government of the Republic does not exercise effective control. The unbilled electrical energy, calculated at a special rate, amounts to €465.000 The estimates and underlying assumptions are revised on a continuous basis. Revisions in accounting estimates are recognized in the (2016: €310.000). period during which the estimate is revised, if the estimate affects only that period, or in the period of the revision and future periods, if the revision affects the present as well as future periods. 6. Other operating income ‑ net The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: 2017 2016 €000 €000 (i) Deferred income Income from reconnection 1.596 1.683

The Group accepts applications for extension of its network in areas not yet covered by the existing network by individuals and legal Employees contribution to the defined benefit plan (Footnote 1) 1.699 1.680 entities. Furthermore the Group accepts applications for additional load from the existing network. In both cases, the Group charges Income from fees for telecommunication usage of optical fibers 1.612 1.508 the applicants with the construction cost. The assets remain under the control of the Group, which performs all necessary repairs and Income from Desalination 13.613 12.707 maintenance. Construction cost is recognized in property, plant and equipment. Consumers’ capital contributions 22.068 21.716 The fact that the cost is recovered from applicants results in not having to be recovered by consumers through electricity tariffs. Greenhouse gas emission allowances cost recovered 13.272 13.218 Otherwise, this cost would have been included in tariffs and consumers would have been billed for the consumption of electricity with Income from TSOC 3.019 2.714 higher prices. All network extension applicants are charged with capital contributions and all consumers are billed with the same tariffs. Sundry income 3.565 3.738 Applicants are ensured of the right of permanent access to the network for an unlimited period of time. The Group is committed to Interest income from: provide access for an unlimited period of time. Capital contributions represent the price for this continuous service and hence income is Bank balances 5.417 4.855 shown as deferred income and is gradually released to the consolidated statement of profit or loss over a period identical to that of the Other 630 847 assets constructed/acquired for this purpose, and which have an average life of 33 1/3 years. This period is considered a reasonable 66.491 64.666 approximation for calculating the period of the customer relationship.

Subsidies from the Group in respect of such capital contributions are deducted from the amounts receivable and charged in the consolidated income statement at the time granted. Footnote 1: The amount represents deduction from the employees’ salaries at the rate of 3% and is paid to the Group for maintaining the viability of the Defined Benefit Plan per Law 216 (i) 2012, paragraph 4 and is included in employer’s contributions. 96 97 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

7. Other losses ‑ net 9. Staff costs

2017 2016 2017 2016 €000 €000 €000 €000 Property, plant and equipment (Note 15): Salaries 65.571 64.257 Loss/(profit) on sale (1) 137 Social insurance and other costs 8.212 8.042 Impairment charge of property, plant and equipment - (5.516) Social cohesion fund 1.322 1.292 Fair value losses on financial assets at fair value through profit or loss (77) (36) Defined benefit cost ‑ current year cost 16.233 9.828 (78) (5.415) Other defined contribution plans 3.388 3.351 94.726 86.770 Average number of staff employed during the year 1.981 1.993

8. Operating costs

2017 2016 2017 2016 €000 €000 €000 €000 Fuel 335.931 245.936 The staff costs were allocated as follows: Purchase of Electricity from third parties 28.213 20.059 Income statement (Note 8): Salaries and employer’s contributions (Note 9) 88.518 78.945 ‑ Staff costs 88.518 78.945 Depreciation (Note 15) 97.822 96.401 Repairs and maintenance 21.326 13.205 Capitalised in fixed assets and work in progress 6.208 7.825 Independent auditor’s fees for the compulsory audit of the annual 94.726 86.770 financial statements 50 50 Auditor General’s remuneration 33 33 Audit of the Funds 16 16 Audit fees prior years - (1) Defined Benefit Plan Rental expenses 609 648 Provision for impairment of inventories 1.286 975 The amounts recognised in the consolidated statement of financial position and the consolidated statement of other comprehensive Stock write off 971 - income of the Group as at 31 December 2017 are in accordance with the actuarial valuation as at 31 December 2017 for the defined benefit Bad debts written off/ provision for bad debts (1.794) (607) plan. The assets used for the purposes of the actuarial valuation were extracted from the financial statements of the Electricity Authority’s Immovable property tax - 103 employees defined benefit plan (the “Plan”) for the year ended 31 December 2017. Cyprus Energy Regulatory Authority fees 1.770 1.743 Cyprus Transmission System Operator fee 4.130 3.930 Transport 2.196 2.208 Insurance 2.996 2.937 2017 2016 Telephones and postages 1.726 1.577 €000 €000 Electricity, cleaning and water 1.866 1.061 Present value of defined benefit obligation 735.745 771.662 Greenhouse gas emission allowances cost 12.238 9.010 Other expenses 14.279 12.954 Fair value of plan assets (548.005) (538.193) Total expenses 614.182 491.183 Net obligation on the consolidated statement of financial position 187.740 233.469 Funding level 74% 70% The total fees charged by the Authority’s statutory auditor during the year ended 31 December 2017 for tax consultancy services amounted to €6.000 (2016: €4.700) and for other non‑audit services amounted to €27.500 (2016: €18.600).

98 99 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

9. Staff costs (cont’)

2017 2016 2017 2016 €000 €000 Changes to the fair value of plan assets during the year €000 €000 Current service cost 12.496 6.944 Fair value of plan assets at the beginning of year 538.193 529.972 Net interest expense 3.737 2.884 Expected return on plan assets 8.520 11.901 Total expense recognized in ‘staff costs’ 16.233 9.828 Contributions by the employer (Note) 12.207 17.626 Contributions by participants 1.064 1.059 Benefits paid out (24.710) (25.422) Adjustments: Actuarial gain 12.731 3.057 Movement in net obligation included in the consolidated 2017 2016 statement of financial position €000 €000 Fair value of plan assets at the end of the year 548.005 538.193 Net obligation in the statement of financial position at the beginning of the year 233.469 132.930 Contributions by the employer (12.207) (17.626) Note: Total expense recognised in the consolidated income statement 16.233 9.828 Employer’s contributions include an amount of €1.699.000 (2016: €1.680.000), that was deducted at the rate of 3% from the employees’ salaries for Total amount recognised in other comprehensive (income)/ loss (49.755) 108.337 maintaining the viability of the Defined Benefit Plan per Law 216 (ii) 2012, paragraph 4 and is presented in other operating income of the Group. Net obligation at the end of the year 187.740 233.469

Remeasurements: 2017 2016 €000 €000 Gain/ (loss) from the remeasurement of the defined benefit obligation 37.024 (111.394) 2017 2016 Changes to the present value of the defined benefit obligation during the year €000 €000 Difference between the expected and actual return on plan assets 12.731 3.057 Present value of the defined benefit obligation at beginning of the year 771.662 662.902 Total actuarial Gain/ (loss) recognized in other comprehensive income/(expense) 49.755 (108.337) Current service cost 12.496 6.944 Interest cost 12.257 14.785 Contributions by participants 1.064 1.059 The cumulative actuarial amount recognised in the statement of other comprehensive income until 31 December 2017 was a deficit of Benefits paid out (24.710) (25.422) €213.653.000 (2016: €263.408.000). Adjustments: ‑ Actuarial (gain)/ loss ‑ (financial assumptions) (31.012) 110.004 ‑ Actuarial (gain)/ loss ‑ (experience) (6.012) 1.390 Present value of the defined benefit obligation at the end of the year 735.745 771.662

100 101 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

9. Staff costs (cont’) The principal actuarial assumptions used for the actuarial valuation were: Based on the unaudited financial statements of the Plan, its assets are comprised as follows:

2017 2016 % % 2017 2016 Discount rate 1,79 1,60 €000 % €000 % Average expected return on plan assets 1,79 1,60 Immovable property 28.362 5,16 27.198 5,02 Total salary increases 1,25 1,25 Shares 94.091 17,11 80.325 14,83 (0,75%+0,50%) (0,75%+0,50%) Debentures ‑ (Government) 49.815 9,06 54.613 10,09 + promotional + promotional and merit and merit Debentures ‑ (Other) 3.929 0,71 3.659 0,68 increases increases Receivables 1.296 0,24 7.685 1,42 General salary increases 0,50 0,50 Loans 19.974 3,63 21.134 3,90 Social Insurance Scheme supplementary pension increases 1,50 1,50 Hedge Funds 4.268 0,78 4.065 0,75 Pension increases 1,00 1,00 Mutual debenture funds 196.953 35,81 190.329 35,15 Increase on maximum insurable earnings limit 2,50 2,50 Cash and cash equivalents 151.242 27,50 152.463 28,16 Price inflation 1,50 1,50 549.930 100,00 541.471 100,00 Mortality table 60% of ΡΑ90 60% of ΡΑ90 Plan duration 18,57 years 19,41 years The amount above represents the total of assets before deducting reserves and liabilities.

In accordance with the amended IAS19, the discount rate should reflect the rate at which the liabilities could effectively be settled. The Plan did not hold any of the Group’s financial assets, immovable property or other assets. Accordingly, the discount rate has been extracted from annual yield of the iBoxx Euro Corporates AA 10+ Bond Index with maturity of 18,57 years (2016: 19,41 years) which corresponds to the average maturity life of the Plan’s liabilities. The estimated regular statement of profit or loss charge for the financial year 2018 based on the amended IAS 19 is as follows:

Assumptions regarding current year’s future mortality rates are according to the published general mortality table PA90 (2016: PA90). The underlying table reduced by 40% represents the expected mortality of the Plan’s members after retirement. According to the underlying mortality rate table, the expected life for a male and female aged 65 (normal retirement age) is 18,4 years and 22,2 2018 2017 years respectively. €000 €000 Current service cost 11.083 12.137 The sensitivity of the defined benefit obligation to changes in the significant financial assumptions, keeping other assumptions constant, is as follows: Net interest charge 3.482 3.735 Total 14.565 15.872

2017 2016 Change Impact Change Impact The actual charge in the consolidated income statement will remain unknown until the end of the year, where any potential additional costs Discount rate +0,50% -8,30% +0,50% -8,50% will be determined. Discount rate -0,50% 9,50% -0,50% 9,80% Salaries +0,50% 6,00% +0,50% 6,40% Expected benefits to be paid from the defined benefit plan for the next year are €24.799.360 (2017: €24.819.608). Salaries -0,50% -5,60% -0,50% -5,80% The expected contributions to be paid to the defined benefit plan for the financial year 2018 are €14.119.324 (2017: €13.263.580). Pensions +0,50% 9,90% +0,50% 10,00% Pensions -0,50% -9,00% -0,50% -9,10% Life expectancy +1 year 4,20% +1 year 4,20% Life expectancy -1 year -4,10% -1 year -4,20% 102 103 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

10. Finance costs Tax on Group profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows:

2017 2016 2017 2016 €000 €000 €000 €000 Interest expense: Profit before tax 59.561 77.105 Borrowings 4.116 5.148 Tax calculated at the applicable tax rates on income 7.445 9.638 Interest on taxes 1 2 Tax effect of expenses not deductible for tax purposes 688 836 Other 46 644 Tax effect of income not subject to tax (848) (604) 4.163 5.794 Defence contribution 1.586 1.451 Net foreign exchange transaction losses (1.502) 791 Tax charge 8.871 11.321 2.661 6.585

The finance cost is allocated as follows: The Group is subject to income tax on taxable profits at the rate of 12,5%

As from tax year 2012 tax losses of 5 years can be carried forward and set against taxable profits. Under certain conditions, interest received may be subject to special contribution for defence at the rate of 30%. In such cases this interest will be exempt from income tax. 2017 2016 €000 €000 In certain cases dividends received from abroad may be subject to special contribution for defence at the rate of 20% for the years 2012 Consolidated income statement 2.661 6.585 and 2013 and 17% for the year 2014 and thereafter. 2.661 6.585 Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc) are exempt from Cyprus income tax.

The tax (charge)/credit relating to components of other comprehensive income is as follows: 11. Tax Tax effects of components of other comprehensive income

2017 2016 €000 €000 Year ended 31 December Year ended 31 December Current tax: 2017 2016 Defence contribution 1.586 1.451 Tax Tax Before (charge)/ After Before (charge)/ After Total current tax 1.586 1.451 tax credit tax tax credit tax €000 €000 €000 €000 €000 €000 Deferred tax (Note 22): Defined benefit obligation: Origination and reversal of temporary differences 7.285 9.870 Remeasurements of post employment Total deferred tax 7.285 9.870 benefit obligation 49.755 - 49.755 (108.337) - (108.337) Tax charge 8.871 11.321 Other comprehensive income 49.755 - 49.755 (108.337) - (108.337)

104 105 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

12. Financial assets at fair value through profit or loss

Assets as per consolidated statement of financial position ‑ 2016 2017 2016 €000 €000 Assets measured Equity securities (Note 3(iii)) 557 635 at fair Loans and value receivables Total €000 €000 €000

Financial assets at fair value through profit or loss are recorded in the consolidated statement of cash flow as part of the movement in Non current receivables - 239 239 working capital. Trade and other receivables - 108.108 108.108 Financial assets at fair value through profit or loss 635 - 635 Changes in fair values of financial assets at fair value through profit or loss are recorded in ‘Other losses ‑ net ’ (Note 7) in profit or loss. Short term deposits - 358.233 358.233 Cash and cash equivalents - 13.457 13.457 13. Financial instruments by category Total 635 480.037 480.672

Assets as per consolidated statement of financial position ‑ 2017 Note: The rest of the statement of financial position item “trade and other receivables” is deposits and prepayments. Assets measured at fair Loans and value receivables Total Liabilities as per consolidated statement of financial position €000 €000 €000 Other financial liabilities Non current receivables - 5.432 5.432 Trade and other receivables - 94.099 94.099 2017 2016 €000 €000 Financial assets at fair value through profit or loss 557 - 557 Borrowings 341.497 417.206 Short term deposits - 378.687 378.687 Net defined benefit obligation 187.740 233.469 Cash and cash equivalents - 33.412 33.412 Trade and other payables (Note) 121.442 107.671 Total 557 511.630 512.187 Total 650.679 758.346

Note: The rest of the statement of financial position item “trade and other receivables” is deposits and prepayments. Note: The rest of the statement of financial position item ‘trade and other payables’ is statutory liabilities and deferred income.

106 107 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

14. Credit quality of financial assets

The credit quality of financials assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if applicable): 2017 2016 €000 €000

(2) 2017 2016 Cash and cash equivalents €000 €000 ΒB - 563 Fully performing trade receivables ‑ net Ba3 708 - Group 1 1.430 1.435 Caa1 26.390 1.115 Group 2 8.469 7.977 Caa2 1.369 6.624 Group 3 29.818 33.255 Caa3 2.112 711 39.717 42.667 30.579 9.013

Past due trade receivables ‑ net Group 4 11.817 12.781 Group 1: New customers (less than 6 months) with no defaults in the past Group 5 2.511 3.025 Group 2: Existing customers (more than 6 months) with no defaults in the past Group 6 686 724 Group 7 5.117 2.963 Group 3: Trade receivables billed during the next year. Group8 20.322 21.286 Group 4: Existing customers (more than 6 months) with some defaults in the past. All defaults were fully recovered. 40.453 40.779 Group 5: Receivables that have been provided for, excluding related parties Other receivables Group 9 8.671 9.641 Group 6: Receivables from related parties that have been provided for. Group 10 10.690 15.260 Group 7: Receivables from related parties including amounts with defaults in the past. 19.361 24.901 Group 8: Other trade receivables including amounts with defaults in the past. Short term bank deposits B1 23.700 - Group 9: Other receivables with no defaults in the past. Caa1 133.023 70.313 Group 10: Past due receivables Caa2 11.147 69.848 (1) Management monitors credit risk arising from deposits in financial institutions without external credit ratings. Caa3 39.991 96.375 Without external credit rating(1) 170.826 121.697 (2) The rest of the consolidated statement of financial position item ‘cash and cash equivalents’ is cash in hand and cash and cash equivalents without external credit ratings. The cash and cash equivalents without external credit ratings amount to €2.357.000 (2016: €4.444.000). 378.687 358.233 None of the financial assets that are fully performing, have been renegotiated.

108 109 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

15. Property, plant and equipment In the consolidated statement of cash flows, proceeds from sale of property, plant and equipment comprise:

Freehold Buildings Plant Lines, Motor Furniture Tools Computer Work Total land and cables vehicles fixtures and hardware in 2017 2016 machinery and and instru- and progress €000 €000 meters office ments softwa equip- Net book value 5 19 ment €000 €000 €000 €000 €000 €000 €000 €000 €000 €000 (Loss)/Profit from the sale of property, plant and equipment (Note 7) (1) 137 At 1 January 2016 Proceeds from disposal of property, plant and equipment 4 153 Cost 41.592 355.993 1.524.158 1.043.369 20.663 7.286 7.335 35.628 12.271 3.048.295 Accumulated depreciation - (134.672) (667.020) (385.414) (19.646) (6.400) (6.714) (32.893) - (1.252.759) Net book value 41.592 221.321 857.138 657.955 1.017 886 621 2.735 12.271 1.795.536 Depreciation amounting to €97.822.000 (2016: €96.401.000) has been charged to operating costs.

Year ended 31 December 2016 Land and equipment located in Turkish occupied area Opening net book value 41.592 221.321 857.138 657.955 1.017 886 621 2.735 12.271 1.795.536 Additions 483 35 533 186 311 123 53 489 34.710 36.923 The total fixed assets shown in the consolidated statement of financial position include land and equipment located in the area occupied Disposals (7) (8) - - - (1) - - - (16) by the Turkish invasion force, whose cost approximates €12.978.000. The depreciation provision for the year in respect of these assets Transfer to inventory - - (1.566) ------(1.566) was NIL (2016: NIL) bringing the accumulated provision at 31 December 2017 to €12.440.000 (2016: €12.440.000) and leaving a written Impairment charge - - (5.516) ------(5.516) down value of €538.000 (2016: €538.000) which represents the cost of land. The consequences of the Turkish occupation on the value of Depreciation charge - (11.879) (55.214) (27.142) (614) (223) (191) (1.138) - (96.401) this land and equipment is unknown. Transfers 103 1.131 2.758 13.460 - - - 2 (17.454) - Closing net book value 42.171 210.600 798.133 644.459 714 785 483 2.088 29.527 1.728.960 At 31 December 2016 16. Trade and other receivables Cost 42.171 357.149 1.515.897 1.057.015 20.974 7.408 7.389 35.851 29.527 3.073.381 Accumulated depreciation - (146.549) (717.764) (412.556) (20.260) (6.623) (6.906) (33.763) - (1.344.421) Net book value 42.171 210.600 798.133 644.459 714 785 483 2.088 29.527 1.728.960 2017 2016 Year ended 31 December 2017 €000 €000 Opening net book value 42.171 210.600 798.133 644.459 714 785 483 2.088 29.527 1.728.960 Trade receivables 95.429 101.184 Additions 264 70 48 211 1.103 182 71 555 42.930 45.434 Less: Provision for impairment of receivables (15.259) (17.738) Disposals ------(5) - (5) Trade receivables ‑ net 80.170 83.446 Depreciation charge - (11.901) (55.825) (27.575) (569) (222) (151) (1.579) - (97.822) Capital contributions receivable by instalments 510 678 Transfers 160 2.119 18.312 19.535 - - - 1.355 (41.481) - Advance payments to subcontractors 3.969 4.369 Closing net book value 42.595 200.888 760.668 636.630 1.248 745 403 2.414 30.976 1.676.567 Receivable from RES fund 10.690 15.260 At 31 December 2017 Other receivables 8.161 8.963 Cost 42.595 359.338 1.534.257 1.076.760 22.020 7.377 7.460 37.703 30.976 3.118.486 Deposits and prepayments 3.509 1.083 Accumulated depreciation - (158.450) (773.589) (440.130) (20.772) (6.632) (7.057) (35.289) - (1.441.919) 107.009 113.799 Net book value 42.595 200.888 760.668 636.630 1.248 745 403 2.414 30.976 1.676.567 Less non‑current receivables (5.432) (239) Current receivables 101.577 113.560

The amount of 10.690.000 relates to past due receivable from the RES fund. On 16/5/2017, the Board of Directors of the Authority decided to deduct from the total receipts of the RES fee charged on electricity bills every month, the amount payable to RES producers as subsidy and then deduct the amount of €450.000, which is the minimum amount required to settle the amount due to the Authority within a period of 3 years.

110 111 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

16. Trade and other receivables (cont’)

The maturity of non‑current receivables and prepayments is as follows: Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers who have a variety of end markets in which they sell. The Group’s historical experience in collection of trade receivables falls within the recorded allowances. Due to these factors, Management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s trade receivables. 2017 2016 €000 €000 Movements on the Group’s provision for impairment of trade receivables are as follows: Between 1 and 2 years 5.343 144 Between 2 and 5 years 89 95 5.432 239 2017 2016 €000 €000

The fair values of current trade and other receivables approximate their carrying values at the reporting date. At 1 January 17.738 19.297 Provision for impairment of receivables (2.479) (1.559) At 31 December 2017, trade receivables of €58.101.000 (2016: €65.455.000) were neither due nor impaired. At 31 December 15.259 17.738

Trade receivables that are less than three months past due are not considered impaired. As of 31 December 2017, trade receivables of €18.872.000 (2016: €14.892.000) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: The creation and release of provision for impaired receivables have been included in operating costs in the consolidated statement of comprehensive income (Note 8). Amounts charged to the provision account are generally written off, when there is no expectation of recovering additional cash.

2017 2016 Other groups within trade and other receivables contain impaired assets or past due amounting to €75.000 (2016: €75.000). €000 €000 Up to 3 months 15.581 13.080 The maximum exposure to credit risk at the reporting date is the carrying value of each group of receivable mentioned above. The Group 3 to 6 months 1.129 682 does not hold any collateral as security. Over 6 months 2.162 1.130 The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: 18.872 14.892

As at 31 December 2017, trade receivables of €18.456.000 (2016: €20.837.000) were impaired and provided for. As at 31 December 2017 2017 2016 the amount of the provision was €15.259.000 (2016: €17.738.000). The individually impaired receivables mainly relate to consumers, which €000 €000 are in an unexpectedly difficult economic situation. It was assessed that a portion of the receivables is expected to be recovered. The Euro ‑ functional and presentation currency 107.009 113.799 ageing of these receivables is as follows: 107.009 113.799

2017 2016 €000 €000 Up to 3 months 1.650 1.660 3 to 6 months 1.340 1.423 Over 6 months 15.466 17.754 18.456 20.837

112 113 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

17. Inventories 19. Short term deposits

2017 2016 2017 2016 €000 €000 €000 €000 Fuel 56.761 42.497 Short‑term bank deposits 378.687 358.233 Spare parts and other consumables 62.311 61.913 119.072 104.410 The effective interest rate on short term bank deposits was 0,50% ‑ 2,15% (2016: 0,70% ‑ 2,20%) and these deposits had a maturity of 3 ‑ 12 months (2016: 3 ‑ 12 months), Deposits of €11,7 million (2016: €13,2 million) are used as guarantees for fuel deliveries.

The cost of inventories recognized as expense and included in operating costs amounted to €345.525.000 (2016: €252.990.000). The short‑term bank deposits are denominated in the following currencies:

At 31 December 2017, inventories amounting to €7.825.113 (2016: € 6.903.802) were impaired and they were provided for. The amount of provision was €1.286.418 (2016: €975.000). 2017 2016 Inventories are stated at cost less impairment. €000 €000 Euro ‑ functional and presentation currency 366.941 345.068 United States Dollars 11.746 13.165 18. Tax refundable / Tax (liability) 378.687 358.233

2017 2016 €000 €000 20. Cash and cash at bank Corporation tax 4.287 4.287 Cash and cash equivalents included in the consolidated statement of cash flows represent the amounts in the consolidated statement of financial position of cash at bank and in hand and are analysed as follows: Special contribution for defence (17.375) - (13.088) 4.287

2017 2016 €000 €000 There are transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Cash at bank and in hand 32.637 13.094 Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and Short‑term bank deposits 775 363 deferred tax provisions in the period in which such determination is made. 33.412 13.457

The effective interest rate on short term bank deposits was 1,00% ‑ 1,40% (2016: 1,25% ‑ 1,75%) and these deposits had a maturity of 30 days (2016: 56 days). Cash and bank balances are denominated in the following currencies:

2017 2016 €000 €000 Euro ‑ functional and presentation currency 32.862 12.922 United States Dollars 550 535 33.412 13.457

114 115 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

20. Cash and cash at bank (cont’)

The loans are payable in Euro as stipulated in the loan agreements. Loans are guaranteed as to the repayment of principal and interest by Reconciliation of liabilities arising from financing activities: the Republic of Cyprus.

Bank The weighted average effective interest rates at the reporting date were as follows: borrowings Total €000 €000 Balance at 1 January 2017 417.206 417.206 2017 2016 Cash flows: % % Repayment of principal (75.709) (75.709) Bank overdrafts and loans 1,0 1,0 Repayment of interest (4.113) (4.113) Interest expense 4.113 4.113 Balance at 31 December 2017 341.497 341.497 The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the reporting dates are as follows:

2017 2016 21. Borrowings €000 €000 Floating rate 6 months or less 341.093 416.764 2017 2016 Fixed rate on maturity 404 442 €000 €000 341.497 417.206 Current Bank borrowings 41.680 31.023 The Group has the following unutilized borrowing facilities: Non‑current Bank borrowings 299.817 386.183 Total borrowings 341.497 417.206 2017 2016 €000 €000 Floating rate Maturity of non‑current borrowings is as follows: Expiring within one year 35.000 85.000 Expiring beyond one year 42.500 2.500 77.500 87.500 2017 2016 €000 €000

Between 1 and 2 years 37.135 44.032 The carrying amounts of bank overdrafts and bank loans approximate their fair value. Between 2 and 5 years 99.893 112.300 The carrying value of the Group’s borrowings is denominated in the following currencies: Over 5 years 162.789 229.851 299.817 386.183 2017 2016 €000 €000 Euro ‑ functional and presentation currency 341.497 417.206 341.497 417.206

116 117 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

22. Deferred tax liabilities 23. Deferred income

Deferred tax liabilities are analysed as follows:

2017 2016 2017 2016 €000 €000 €000 €000 Balance at 1 January 447.076 451.159 Deferred tax liabilities to be settled after twelve months 82.958 75.673 Additions 22.578 17.633 Transferred to the consolidated income statement (22.068) (21.716) Balance at 31 December 447.586 447.076 Deferred taxation is calculated in full on all temporary differences under the liability method using the applicable tax rates (Note 11). Deferred income more than one year (425.045) (425.008) Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax Deferred income within one year 22.541 22.068 liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority. The gross movement of the deferred taxation account is as follows:

24. Trade and other payables 2017 2016 €000 €000 At 1 January 75.673 65.803 Charge to income statement (Note 11) 7.285 9.870 2017 2016 €000 €000 At 31 December 82.958 75.673 Fuel oil suppliers 32.532 20.756 Other Suppliers 20.009 12.964 Value Added Tax payable 6.179 10.692 The movement in deferred income tax assets and liabilities during the year is as follows: Pay As You Earn tax payable 601 502 Retention from contractors on capital contracts 2.489 2.054 Consumers’ deposits 31.265 27.839 Accelerated Deferred Tax Other Total Interest payable 83 123 tax income loss depreciation €000 Other contribution to defined benefit plan - 6.000 €000 €000 €000 €000 Accrued expenses 3.139 2.378 At 1 January 2016 128.185 (56.395) (4.283) (1.704) 65.803 Creditors for purchase of land and substations 8.409 8.660 Charged/ (credited): Amount available for interpleader proceedings 12.717(1) 14.277(1) Income statement 6.951 510 2.059 350 9.870 Other creditors 10.799 12.620 128.222 118.865 Balance at 1 January 2017 135.136 (55.885) (2.224) (1.354) 75.673 Charged/ (credited): Income statement 5.484 (64) 1.820 45 7.285 The fair values of trade and other payables approximate their carrying values at the reporting date. Balance at 31 December 2017 140.620 (55.949) (404) (1.309) 82.958 (1) This amount represents a retention of amounts payable to a supplier of fuel to award beneficiaries through interpleader proceedings of various demanders against the Group and the specific supplier.

118 119 Annual Report 20 17

Notes to the consolidated financial statements for the year ended 31 December 2017 (cont’)

25. Subsidiary undertakings 27. Commitments

Capital commitments

2017 2016 Country of Principal % Holding % Holding incorporatio activities 2017 2016 Electriki Ananeosimes Limited 100 100 Cyprus Dormant €000 €000 EAC LNG Investments Company Ltd 100 100 Cyprus Dormant Commitments in respect of contracts or with work in progress 112.769 9.933 EAC Solar Thermal Power Ltd 100 100 Cyprus Dormant Approved commitments but not contracted or without any work in progress 83.923 80.974 ESCO AHK Ltd 100 100 Cyprus Dormant Approved commitments with expenditure outstanding 196.692 90.907

The results of Subsidiary undertakings, which during 2017 remained dormant were consolidated in the Group accounts of Electricity Authority of Cyprus. Operating lease commitments ‑ where the Authority is the lessee The future minimum lease payments under non‑cancellable operating leases are as follows: 26. Contingent liabilities

(a) As at 31 December 2017 the Group had a contingent liability in respect of possible tax for various expenses, amounting 2017 2016 to €1.762.000 (2016: €1.711.000) and possible refund for defence contribution amounting to €4.073.000 (2016: €3.939.000). €000 €000

Not later than one year 366 349 (b) On 2 December 2015, Income Tax authorities sent a notification letter to the Authority regarding Tax Enforcement for non‑withholding tax from employees emoluments for the year 2009, which amounted to €3.925.000 plus interests and penalties. The Authority filed Later than one year and not later than 5 years 505 660 an objection on 26 January 2016 for the above mentioned case. The Group believes that there is an adequate defence against all Over 5 years 13 13 claims and therefore no provision has been made in the financial statements. 884 1.022

(c) As at 31 December 2017 the Group had contingent liabilities in respect of pending litigations amounting to €4.082.000 (2016: €5.123.000) and contingent asset of €10.000 (2016: €259.000).

The Group believes that adequate defence exists against all claims and does not expect to suffer significant loss. Accordingly no provision has been made in these financial statements in respect of this matter.

(d) On 31 December 2017 the Group had the following guarantee documents: 28. Related party transactions

(i) An amount of €2.771.000 for the benefit of Senior Customs Officer regarding the authorization granted to the Group for exemption from payment of excise duty on energy products used for electricity generation, including fuel oil (diesel). The Electricity Authority of Cyprus is a Public Corporate Body which was established in Cyprus under the Electricity Development Law Cap. 171 of 1952. (ii) An amount of €210.000 for the benefit of the Department of Environment for the permit of industrial emissions and waste (i) Sales management.

(iii) An amount of €11.000 for the benefit of the Human Resources Development Authority for participating in the development plan of training. 2017 2016 €000 €000 Sales of electricity to related parties of the Group 61.609 53.981

The related parties consist of Governmental controlled entities (e.g. Government Offices, Ministries etc.) and all transactions were made under the normal trade terms and conditions.

120 121 Annual Report 20 17

Notes to the consolidated financial statements Appendices for the year ended 31 December 2017 (cont’)

28. Related party transactions (cont’) Appendix 1

(ii) Year end balances ‑ net

CONSUMERS, SALES AND AVERAGE PRICES

2017 2016 €000 €000 AS AT 31 DECEMBER 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Receivable from related parties from sales of electricity 5.803 3.461 NUMBER OF CONSUMERS Domestic 386 489 402 671 415 150 422 655 427 184 428 616 433 072 437 577 442 293 444 895 The related parties consist of Governmental controlled entities (e.g. Government Offices, Ministries etc.). Commercial 80 913 83 160 84 800 85 325 85 198 84 695 85 188 85 525 86 494 87 065 (iii) Key management personnel compensation Industrial 11 792 11 618 11 391 11 255 10 805 10 222 9 836 9 712 9 596 9 760 The compensation of key management personnel is as follows: Agricultural 12 796 13 546 14 209 14 692 14 978 15 280 15 536 15 748 15 886 15 902 Street lighting 8 499 9 035 9 500 9 983 10 333 10 635 10 942 11 138 11 287 10 878

2017 2016 TOTAL 500 489 520 030 535 050 543 910 548 498 549 448 554 574 559 700 565 556 568 500 €000 €000 SALES TO CONSUMERS Salaries 217 244 (Thousand kWh) Social insurance and other costs 42 53 Domestic 1 682 327 1 720 777 1 737 474 1 721 663 1 671 095 1 435 231 1 407 656 1 475 972 1 567 312 1 641 033 Social cohesion fund 4 5 Commercial 1 881 173 1 918 932 1 990 994 1 854 782 1 836 756 1 655 761 1 630 789 1 659 588 1 728 200 1 755 094 Pension fund costs 56 421 Industrial 757 803 791 640 816 074 796 187 631 829 581 860 656 097 685 864 819 693 856 422 319 723 Agricultural 156 930 143 971 152 642 136 747 128 590 129 129 135 680 129 447 155 638 156 453 Street lighting 77 596 80 426 84 788 85 502 87 330 87 807 85 257 85 211 87 648 86 578

(iv) Directors’ remuneration TOTAL 4 555 829 4 655 746 4 781 972 4 594 881 4 355 600 3 889 788 3 915 479 4 036 082 4 358 491 4 495 580 The total remuneration of the Directors is as follows: AVERAGE SALES PER CONSUMER (kWh)) Domestic 4 353 4 273 4 185 4 073 3 912 3 349 3 250 3 373 3 544 3 689 2017 2016 Commercial 23 249 23 075 23 479 21 738 21 559 19 550 19 143 19 405 19 981 20 158 €000 €000 Industrial 64 264 68 139 71 642 70 741 58 476 56 922 66 704 70 620 85 420 87 748 Emoluments in their executive capacity 58 23 Agricultural 12 264 10 628 10 743 9 308 8 585 8 451 8 733 8 220 9 797 9 839 Street lighting 9 130 8 902 8 925 8 565 8 452 8 256 7 792 7 650 7 765 7 959

AVERAGE PRICE PER UNIT 29. Events after the reporting period BILLED (cent) Domestic 15,988 13,321 16,192 18,695 22,271 20,743 18,663 14,654 12,417 14,267 Until the date of approval of these Consolidated Financial statements an amount of €2.238.000 has been received from the insurance Commercial 16,982 14,196 16,905 19,377 22,645 20,84 18,923 14,731 12,498 14,108 company as compensation for the loss suffered by the Flue Gas Desulphurization Plant of Unit 3 of Vasilikos Power Station from the fire incurred on 30 November 2016. The insurance company has accepted full responsibility and has implemented a procedure for covering Industrial 14,955 12,325 14,982 17,148 20,868 19,127 16,824 12,531 10,079 11,949 the restoration cost. This process has not been completed by the date of approval of these Financial Statements and additional amounts Agricultural 15,296 12,697 15,440 18,293 21,929 20,013 18,168 14,127 11,996 13,533 are expected to be received from the insurance company until the full restoration of the Plant. Street lighting 14,554 12,129 14,711 17,481 20,909 19,393 17,353 13,366 10,558 13,166

There were no other material events after the reporting date which have a bearing on the understanding of the Consolidated Financial AVERAGE PRICE 16,178 13,473 16,232 18,668 22,188 20,488 18,418 14,281 11,957 13,717 Statements.

Reports of the Independent Auditor and Auditor General of the Republic on pages 72 to 75

122 123 Annual Report 20 17

Appendices

Appendix 2 Appendix 2

GENERATION, TRANSMISSION & DISTRIBUTION EQUIPMENT GENERATION, TRANSMISSION & DISTRIBUTION EQUIPMENT (cont’)

Taken Taken In Commissioned out of In In Commissioned out of In Commission in Commission Commission Commission in Commission Commission Description Unit 2016 2017 in 2017 2017 Description Unit 2016 2017 in 2017 2017 POWER STATIONS TRANSMISSION EQUIPMENT (cont’) Dhekelia “B” Power Station 132kV Transmission Liones Steam Turbines No. 6 - - 6 operated 66kV Capacity MW 360 - - 360 Route Lenght km 42,575 - - 42,575 Internal Combustion Engines No. 6 - - 6 Circuit Length km 85,150 - - 85,150 Capacity MW 100 - - 100 66kV Transmission Lines Moni Power Station: Route Lenght km 40,263 - - 40,263 Steam Turbines No. - - - - Circuit Length km 40,263 - - 40,263 Capacity MW - - - - 132/66kV Interbus Transformers No. 13 - - 13 Gas Turbines No. 4 - - 4 MVA 648 - - 648 Capacity MW 150 - - 150 132/11kV Step Down Transformers Αρ. 107 1 1 107 Vasilikos Power Station: MVA 3 591,5 40 31,5 3 600 Gas Turbines No. 1 - - 1 132/6,6kV Step Down Transformers No. 2 - - 2 Capacity MW 38 - - 38 MVA 58 - - 58 Steam Turbines No. 3 - - 3 132/3,3kV Step Down Transformers No. 2 - - 2 Capacity MW 390 - - 390 MVA 20 - - 20 Combined Cycle 66/11kV Step Down Transformers No. 21 1 - 22 Gas Turbine No. 2 - - 2 MVA 271 10 - 281 Capacity MW 440 - - 440 66/3,3kV Step Down Transformers No. 2 - - 2 MVA 5 - - 5 TRANSMISSION EQUIPMENT 15,75/132kV Step Down Transformers No. 3 - - 3 220kV Transmission Lines MVA 495 - - 495 operated at 132kV 11/132kV Step Down Transformers No. 20 - - 20 Route Length km 43,885 - - 43,885 MVA 1 304 - - 1 304 Circuit Length km 87,770 - - 87,770 11/66kV Step Down Transformers No. 0 - 4 0 132kV Transmission Lines - MVA 0 - 150 0 Route Length km 447,397 - 5,287 442,11 Shunt Reactor 75 ΜVAr No. 2 1 - 3 Circuit Length km 894,794 - 9,644 885,15 ΜVAr 150 75 - 225 132kV Underground Cables Substations No. 63 - - 63 Route Length km 211,425 16,014 - 227,439 Circuit Length km 211,425 16,014 - 227,439 DISTRIBUTION EQUIPMENT: 132kV Underground Cables-Operated MV Overhead Lines km 5 855,782 54,84 16,4 5 894,22 Operated at 66kV MV Underground Cables km 3 812,047 65,55 12,63 3 864,97 Route Length km 0 - - 0 LV Overhead Lines km 9 921,407 103,31 19,9 10 004,82 Circuit Length km 0 - - 0 LV Underground Cables km 6 038,26 160,57 0,44 6 198,34 66kV Underground Cables 22000-11000/433/250V Route Length km 0,491 - - 0,491 P.M. Transformers No. 10 327 156 34 10 449 Circuit Length km 0,491 - - 0,491 kVA 959 508 10 880 3 980 966 408 22000-11000/433V G.M. Transformers No. 6 250 53 11 6 292 kVA 3 523 590 34 720 9 000 3 549 310

124 125 Electricity Authority of Cyprus Head Ofice 11 Amfipoleos str. P.O.Box 24506 CY-1399 Lefkosia Τel: +357 22201000 Fax: +357 22201020 E-mail: [email protected] Website: www.eac.com.cy

Edited by General Management Office Public Ralations Department Design PARTNERS / YR Photos Loizos Economides, Antonis Farmakas

Annual Report 2017 has been issued in electronic form only.

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